Royalty Auditing

Get the full measure of royalties you bargained for while preserving your valuable relationships with licensees.

Royalty Auditing

We are a nationally recognized leader in providing royalty audit services — over 200 such engagements in total — for university technology transfer offices, research foundations, and U.S. government research laboratories, as well as corporations and individual inventors (link to list of selected clients and link to selected industries/product-markets where we have experience).  Our royalty audits have resulted in the collection of many tens of millions of dollars in under-reported royalties (link to list of selected results).

We believe royalty audits are a necessary part of a technology transfer office’s overall IP strategy.  Properly done, a royalty audit answers two fundamental questions regarding the completeness and accuracy of the licensee’s royalty reporting, while preserving or improving the licensee-licensor relationship:

  • Has the licensee accounted for all the licensed products sold?
  • Have they accounted for them in a manner consistent with the license agreement?

Royalty audits provide many benefits including:

  • Recovery of unpaid royalties
  • Access to information regarding the licensee’s use of licensed property
  • Compliance with contract terms
  • Fulfill fiduciary responsibilities and emphasize the value you place on your IP
  • Reduce the long-term administrative burden and cost to the TTO
  • Peace of mind

Royalty audits differ from traditional financial statement audits in that they involve a different scope of activity and rely on different skills.  Financial audits are typically “broad and shallow” in nature; royalty audits are usually “narrow and deep”.   Financial audits generally involve assessing the client’s representations – royalty audits, by contrast, involve complex interaction with an adverse or potentially adverse party.

Common reasons for under-reporting include unreported sales of licensed products, use of internal transfer prices instead of sell-through prices, overstated and unauthorized deductions against net sales or milestone payments, misinterpretation of underlying agreements, unreported sub-licensing income, and mechanical errors.  For a list of Frequently Asked Questions about royalty audits, please click here.

For brief descriptions of representative assignments, please click here.