A royalty audit ensures that the licensee is paying the correct royalties. Audits manage the risk of underpayment and provide recommendations for a licensee on how to improve their compliance with a licensing agreement for their benefit, as well as that of the licensor. To be eligible, intellectual property assets must be licensed to a third party licensee, in exchange for payments based in usage, which are known as royalties.
If companies are licensing out IP assets, these audits should be a regular feature of their licensing strategy and should be incorporated into every licensing agreement.
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