Royalty Auditing

EPIS Royalty investigation will help you identify what is rightfully yours.

Our job is to help you identify the royalty income owed you. Through mutually agreed-upon procedures (commonly referred to as “royalty audits”), we assist you in determining whether your licensee is reporting sales and their applicable royalties according to the terms of your license agreement. Additionally, we are able to assist you in putting in place the right compliance monitoring programs.

Our Approach

During our royalty engagement, we perform agreed-upon procedures, including those designed to determine if:

• You have procedures and controls for monitoring when royalty payments should be received and if the amount is within an expected or given range.
• Your system has “red flags” notifying you if there is a deviation from last month’s/year’s payment or the average payment to date.
• Your licensee reports its royalty data in the format and detail mandated by the terms of the license agreement.

Our Experience

We have more than 40 years of cumulative experience in conducting royalty investigations. We assist our clients on internal royalty monitoring systems and license agreement language as it relates to accounting terms and definitions, as well as audit paragraphs, all of which afford the licensor greater protection of royalty streams. During the past 10 years we have identified millions of dollars of unpaid royalties, due to:

• Bookkeeping error
• Misunderstanding of license agreement language
• Development and sales of new products that utilize the licensed technology, not being included in the royalty reports
• Intentional understatement

How You Will Benefit

The benefits of our royalty investigations come to you in dollars and cents. Over the past 10 years we have helped our clients identify millions of dollars of unpaid royalties. Based on our experience, we believe that it is good business practice to conduct royalty investigations, the rewards of which many times exceed the costs of doing so. In many cases, based on our findings, the burden of the cost has been shifted to the licensee.

Royalty Auditing FAQ

• What is a Royalty Audit?
• Why do I need a Royalty Audit?
• When do I need a Royalty Audit?
• When to call in Empire Pacific Investigative Services Inc.?
• What is Compliance Checking?
• When is a Compliance Check Needed?

What is a Royalty Audit?

A Royalty Audit is carried out on behalf of the owner of Intellectual Property (IP) who has licensed that IP to a third party in exchange for payments based on usage (usually called “royalties”). The royalty audit is used to the check that the licensee is paying the correct royalties.

Why do I need a Royalty Audit?

The royalty and licensing process is a very complex one and even the best run firms make mistakes. This complexity makes it possible for unscrupulous licensees to deliberately understate the level of royalties due.

When do I need a Royalty Audit?

At least once during the lifecycle of a third party IP license, the owner of the IP should commission a company such as Bevis and Co to carry out a Royalty Audit.

When to call in Empire Pacific Investigative Services Inc.?

If you own Intellectual Property (IP) which you license to a third party for a one off payment or for scheduled payments not linked to usage in any way, you should be able to manage without us. But

• If you have never licensed IP and are considering doing so, you should call our toll free number. We can give you advice, introduce you to a specialist lawyer and help you set up the systems you may need to manage the activity.
• If you license IP to a third party for a fee based on usage (a royalty payment) you should talk to our agents. Our job is to help you maximize your royalty income.

What is Compliance Checking?

A Compliance Check is a “desk top audit” comparing details on incoming royalty statements with the terms of the license to ensure the third party are complying with them.

When is a Compliance Check Needed?

Whenever we undertake a Royalty Audit we always first carry out a Compliance Check. If you license intellectual property to a third party and receive a royalty payment related to usage, we would recommend that you introduce a regular Compliance Checking programmer. A regular programmer of compliance checks will identify problems early and it signals to the licensee that you are managing the license. It will also identify when a full Royalty Audit might be appropriate.