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Intellectual property rights, including patent rights, are an important source of profit for a company, and the strategic management of intellectual property rights is becoming more and more important. When a company (a licensee) enters into a license agreement (for manufacturing technology, software, brands, trademarks etc.) with another company (the licensor), the licensor typically receives a royalty from the licensee. However, the licensee is often the one to calculate and report the necessary payment amounts, and differences and errors in the interpretation of the contract can make it easy for the licensor to overlook underreported royalties.
PwC’s forensic services practice has performed many royalty audits for licensors in a variety of industries by leveraging PwC’s global network. We also have experience in accounting audits to help licensors exercise the auditing clauses included in license agreements. Specifically, we recalculate royalties using accounting data (such as the licensee’s sales data) to verify and report the validity of the royalty amounts from various perspectives. These perspectives include the completeness and accuracy of the data used, and the consistency of the royalty calculation process with the details stipulated in the contract.
In addition to detecting underreported royalties, we also report any breach of contract or potentially problematic interpretation of the contract that we find. This can help you gain a greater understanding of potential future problems related to increases in royalty income and similar issues in other licensing agreements. Continuous communication with your licensees through royalty audits can also help you foster trusting relationships with the licensees.
Our team will review your licensing management system and visualise its current status. Next, we will identify gaps and inefficiencies, formulate improvement measures, and provide support for the development and enhancement of your management system.
Improving and enhancing your management system can lead to a variety of benefits, including the following.