Royalty Audit and Contract Compliance
Proactively protecting intellectual property (IP) and the royalty streams it generates is a vital function for licensors. Many organizations enter into licensing, supply, distribution, tolling, manufacturing or profit-sharing agreements where the financial terms are based on a metric controlled by the party making the payments (e.g., payments based on a percentage of net sales, a per-dollar amount based on the net units shipped, or actual manufacturing costs). These agreements often include a “right to audit” clause that allows the party receiving the payment, or its independent designee, to examine the underlying accounting records to identify whether there are underpayments. EisnerAmper’s experienced team assists clients with contract compliance examinations to identify potential issues, quantify underpayments and obtain monetary recoveries while, at the same time, enhancing brand protection, reputation, relationships and intellectual property across a variety of industries within the U.S. and internationally.
Underpayments may be significant and stem from a variety of reasons: ineffective systems, processes and controls; errors; personnel turnover; contractual misinterpretations; rapid growth; aggressive and fraudulent account practices; among others. Performing a royalty examination helps identify unreported products and services, underreported sales, and excessive and inappropriate deductions. EisnerAmper’s Royalty Audit and Contract Compliance Group identifies, quantifies and recovers royalties and other amounts due to licensors, provides essential information on the activities of their licensees and helps clients strategically protect their IP and royalty streams.
We represent trademark, copyright, brand and patent licensors across a variety of industries, with concentrations in consumer products, entertainment, technology and life sciences. Our clients range from individuals, entertainment companies, fashion designers, and sports leagues and brands, to Fortune 500 organizations, inventors, electronics manufacturers, biotech companies, pharmaceutical companies, universities and research institutes.
Clients who engage our Royalty Audit and Contract Compliance team can expect several distinctive approaches. First, we focus on tangible results, including the recovery of underreported revenue and the re-establishment of contractual baselines. Second, we support strong relationships, entering into engagements with the understanding that licensor and licensee have shared interests in a collaborative resolution of differences that will keep their business relationships mutually profitable. Third, we provide essential market insight, as the royalty compliance process is an opportunity to harvest business intelligence that will help our clients protect their IP, reputations and market positions as well as maximize their licensing revenue.
Because EisnerAmper fosters relationships, our clients benefit from our deep connections to networks of peer professionals in the licensing and royalty communities. The benefits of hiring EisnerAmper to conduct a contract compliance examination include:
- Identifying underreported revenue, which often exceeds the cost of performing the examination
- Increasing royalties prospectively
- Identifying and resolving issues before they become material, which improves transparency and strengthens relationships
- Increasing shareholder value through enhanced compliance, which sends a message of compliance to the market
- Achieving non-monetary goals, such as brand protection and business intelligence
Our practice leaders are acknowledged professionals, with years of practical experience, who are sought-after as speakers at major industry events, article authors and expert witnesses.