ROYALTY AUDITS

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A recent study indicates that 90% of the value of corporations today results from intellectual property while only 10 years ago the value was a mere 15%. Also, according to the US Patent and Trademark Office, only 3% of all patents ever make more money than the initial cost of the patent. Currently, inaccurate reporting of royalty streams usually occurs in over 90% of all royalty audits performed. Through experience in reviewing thousands of licensing agreements and auditing the related royalty streams, we  have consistently uncovered instances of inaccurate reporting resulting in the underpayment of millions of dollars of royalty revenue to licensors.

 

Our involvement is usually precipitated by a ‘right to audit’ clause with our approach aimed at preserving the underlying business relationship, easing third party concerns about fair treatment and maintaining the confidentiality of its information. We generally find that there are several reasons for underreporting including the entry of new products, revised product codes, incorrect pricing, changes in accounting systems, acquisitions and divestitures, changes in staffing, misinterpretation of contract terms, and lack of compliance monitoring. Establishing procedures that actually prevent under/non-reporting from recurring completes the picture. 

 

Either as a standalone product or as part of a royalty audit, a thorough list of procedures to assist licensees in preparation of royalty reports is prepared.  The final result is that we are generally able to increase revenues or decrease costs. Our Company is also prepared to assist clients when instances of fraud are identified.

 

See link to related article regarding Royalty Audit Checklist  from both mondaq.com and les Nouvelles (Licensing Executive Society).  Also attached is the revised Royalty Audit Checklist 2014 along with another article, Nine Key Points About Royalty Audits.