INTRODUCTION AND PURPOSE OF EXAMINATION

The principle reason to adopt a royalty verification program that covers your intellectual properties is the same reason that we have the Internal Revenue Service. The plain fact is, a self-assessment system has many flaws. It is common for a licensee to misinterpret the contractual license agreement in addition to making mathematical and accounting errors. While our examinations and audits are adversarial by nature, our team of experienced professionals perform them in a discreet and non-confrontational manner and our experience in the audit process enables us to encourage settlements between the licensor and licensee, thus avoiding costly litigation.

We have found underreporting to occur in a significant majority of the reviews that we have performed. This is largely due to carelessness on the part of the licensee and not intentional underreporting. Licensees do not properly account for all units sold, units returned, the definition of what allowances the contract of license allows and the difference between regular sales and F.O.B sales. In addition to our verification of royalties earned we review territorial distribution rights and sublicensing rights.

 

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