IP Audit explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
An intellectual property audit is a structured check of what a company owns, what it uses under licence, whether the paperwork supports its claim and what could go wrong. It is useful to founders and finance heads of companies that depend on a brand, software, designs or know-how, and to investors and buyers who will check the same things.
There is no statutory requirement for a company to run an IP audit; it is practice, not a legal requirement. A good audit lists every asset, checks who owns each one on paper, confirms registration and renewal status, reviews licences in and out and encumbrances, and ends with an IP register and an action list. Its commonest findings are not exotic: creations by staff or contractors that were never assigned, registrations in a founder's own name, and licences with no written terms.
When an audit is done and which kind
An audit is usually done before a funding round, a sale or a licensing deal, and periodically thereafter. Practice recognises three kinds: a general audit across all assets; an event-driven audit, ahead of a transaction (what a buyer's team calls IP due diligence); and a limited audit of one right, for example only the marks. The same steps apply to each; the scope differs. A company that wants the portfolio kept tidy afterwards can look at our IP portfolio management service.
The steps
1. List every asset. Trade marks and logos, designs, patents and applications, copyright works (software, content, drawings, photographs), domain names, trade secrets and know-how, and databases. Start from what the business actually uses, not from what has been registered.
2. Check who owns each. For each asset, find the document that shows ownership: registration certificate, assignment, employment or consultancy terms. Ask how it was created, by whom and under what arrangement. Creations by employees and independent contractors, and registrations held by founders personally, are the main risk. The rules on ownership and assignment differ by statute; our posts on licences by owners of copyright and on disputes over assignment of copyright show how that Act treats them.
3. Check status. Registered or pending, in whose name, in which classes or fields, next renewal, and any opposition or objection. A registration in the wrong name is a defect even if it is valid.
4. Review licences in and out. Every licence the company gives or takes: parties, scope, territory, term, exclusivity, royalty, termination. Software and content used under third-party licences belong here as well.
5. Look for encumbrances. Security over IP, assignments or licences already granted, and any recorded interest. For the entries on the registers, see our posts on registration of assignments and transmissions of trade marks and of patents. For patents, there is also the post on section 68 of the Patents Act, which deals with assignments that are not valid unless in writing and duly executed. The requirements of each Act are set out in those posts, not restated here.
6. Assess infringement risk. Both sides: could the company's use infringe someone else's right, and is anyone using the company's? Record the evidence, not the guess.
7. Check confidentiality. Trade secrets survive only if kept secret. See what is in place: agreements with staff, vendors and counterparties. A model is in our non-disclosure agreement draft.
8. Produce the register and action list. One document the board can read and the next person can maintain.
Table: the IP register (own drafting, practice)
| Asset | Evidence of ownership | Status | Action |
|---|---|---|---|
| Name and logo (mark) | Registration certificate in company's name | Registered; renewal date noted | Diarise renewal |
| Mobile app (software) | Employment terms and contractor agreement | In use; not registered | Obtain written assignment from contractor |
| Core algorithm (know-how) | Staff confidentiality terms | Trade secret | Tighten access; add exit procedure |
| Product design | Designer's invoice only | Unregistered | Assignment; consider design registration |
| Domain name | Registered in a founder's personal name | Active | Transfer to the company |
| Third-party library | Licence terms | Used under licence | Check that use is within the licence |
Table: common gaps and the cure
| Gap | Why it matters | Cure |
|---|---|---|
| Work made by a contractor with no written assignment | Ownership may not be with the company | Written assignment, signed now |
| Founder holds the registration | Company does not hold its own brand | Assignment to the company; register it where the Act provides |
| Licence agreed orally | Terms cannot be proved | Written licence |
| Renewal missed | Rights may lapse | Calendar and responsibility |
| No confidentiality terms | Trade secret status is weak | Agreements with staff and vendors |
| Open-source or third-party code used outside its terms | Exposure to claims | Inventory and review |
Worked example (all details assumed)
Pixelwave Software Private Limited (assumed) is preparing for a funding round. Its audit finds six assets: the company name and logo, a mobile app, a core algorithm, a product design, a domain name and a third-party library.
Three defects emerge. First, the app's interface was written by an independent developer with no written assignment, so the company's paper title is thin. Second, the domain name sits in a founder's personal account. Third, the library is used in a product sold to customers on terms the licence may not allow. The register records all six, with the three defects marked. The action list: a signed assignment from the developer, transfer of the domain, and a legal read of the library licence, all completed before the investor's diligence starts. The investor then sees a short, honest register rather than finding the defects itself. For how this feeds the funding papers, see the note on the term sheet and share subscription agreement. For putting a value on what the register shows, see the post on valuation of intangible assets.
Common lapses
- Starting from the registrations instead of from what the business uses.
- Accepting a founder's assurance in place of a document.
- Auditing the marks and ignoring software and know-how.
- Leaving the register undated, so no one knows how current it is.
- Never acting on the action list.
Need help with an IP audit?
If a funding round, sale or licence is coming, our team can run the audit, build the register and prepare the assignments and renewals it calls for through our IP portfolio management service. What the company then does with its rights is covered in our note on assignment, licence or franchise.
Key takeaways
- An IP audit is practice, not a legal requirement; it protects value and speeds up transactions.
- Start from what the business uses, and list every kind of asset.
- Ownership on paper matters more than ownership in conversation.
- Check status, licences in and out, encumbrances and confidentiality.
- The output is a register and an action list.
- Fix defects before a counterparty finds them.
Read next
- Intellectual property commercialisation: assignment, licence or franchise
- Term sheet and share subscription agreement
- Section 45: registration of assignments of trade marks
- Valuation of intangible assets
Disclaimer: Based on the Companies Act, 2013 (MCA consolidated text) and, for the Essential Commodities Act, 1955, the India Code text showing amendments up to Act 40 of 2021, as consulted on 6 October 2026. Later amendments, rules, notifications and control orders should be checked in their current form. Checklists, report outlines and examples are illustrative drafting by TaxClue with invented names and figures. This article is general information, not legal advice; check the official text before acting.