This interview is particularly relevant for any company that licenses out its intellectual property (IP) for commercialization purposes and has licensing royalty revenue streams. Whether you’re a small business or a large corporation, the principles of licensing compliance apply, but the specific best practices may vary depending on the size and complexity of your operations. Smaller companies might focus on establishing foundational compliance processes, while larger organizations may need to adopt more sophisticated, technology-driven strategies to manage their extensive licensing portfolios effectively.

In an era where intellectual property is a cornerstone of business success, ensuring that licenses are properly adhered to is more crucial than ever. In this interview with Tomas Geerkens, we want to demystify the topic, explore its evolution, and discuss best practices that empower companies to protect their valuable IP assets. Whether you’re a seasoned IP professional or new to the field, you will gain insights into the strategies and tools that can help you navigate the complexities of licensing compliance and safeguard your company’s innovation.

IP business academy: Can you explain to us what licensing compliance is and how it has evolved over time?

Tomas Geerkens: Licensing compliance is about ensuring that your licensees are following the terms of your intellectual property (IP) licenses. It’s more than just a financial check—it’s about safeguarding the integrity and value of your IP. Historically, licensing compliance was more reactive, often triggered by suspicion or evidence of misuse. However, the approach has evolved significantly. Today, it’s proactive and strategic, integrating technology to monitor compliance in real-time and emphasizing education and relationship-building with licensees. This proactive approach allows licensors to drive more comprehensive risk coverage across their licensee base using their existing compliance budget, which helps alleviate concerns about the potential costs associated with a comprehensive compliance program. The goal is not just to detect issues but to prevent them by fostering transparency and collaboration.

IP business academy: For companies who license out their IP, what are some benefits of implementing a license compliance program?

Tomas Geerkens: Implementing a license compliance program offers multiple benefits beyond just securing revenue. While financial protection is critical — ensuring that you capture the total value of your IP — there are also significant non-monetary advantages. A compliance program helps to protect your brand, ensure consistent quality in how your IP is used, and build trust with your licensees by demonstrating a commitment to fairness and transparency. Moreover, about 85% of audits carried out reveal financial underreporting, highlighting the importance of a robust compliance program. Additionally, it provides a structured opportunity to engage with licensees, fostering more robust partnerships that can lead to mutual growth. Finally, it mitigates risks by identifying both monetary discrepancies and potential operational issues early on, allowing for timely resolutions that maintain positive relationships.

IP business academy: Some readers may read ‘license compliance’ and think solely of ‘audits’. What are some other aspects of a best practices license compliance program our readers should be aware of?

Tomas Geerkens: While audits are a critical component, a best practices license compliance program is far more comprehensive. It starts with clear and precise licensing agreements that leave little room for misinterpretation. Communication is also crucial, as well as educating your licensees on their obligations and ensuring they have the support they need to comply effectively. Technology plays a pivotal role in ongoing monitoring, allowing licensors to track usage and reporting efficiently. This allows licensors to drive more comprehensive risk coverage across their licensee base using their existing compliance budget. However, compliance is not just about catching discrepancies; it’s about creating an ongoing dialogue with licensees to address any concerns proactively and to foster a collaborative atmosphere. A robust program also includes transparent dispute resolution processes, which are approached with a business and relationship mindset but grounded in an accurate assessment of the reporting realities.

IP business academy: What are some key metrics that licensors can use to evaluate their existing compliance efforts?

Tomas Geerkens: Critical metrics for evaluating compliance efforts go beyond just financial recovery. While the majority of programs drive significant royalty collection rates, licensors should also look at the broader impact of their compliance program. Metrics such as the nature and frequency of audit findings, particularly non-monetary issues, are critical indicators. Feedback from licensees is another valuable metric — assessing their understanding of the agreements can reveal areas for improvement. As an example, identifying an agreement clause that is consistently being misinterpreted can allow for a contractual adjustment in future agreement templates that will help avoid costly and tense interpretation disputes. Additionally, the time it takes to resolve disputes and the overall effectiveness of dispute resolution are essential to track. Ultimately, the return on investment (ROI) of a compliance program should be measured not only by monetary recovery but also by the strengthening of relationships and the improvement of operational practices.

IP business academy: For a company looking to explore a license compliance process/program for the first time, where do they get started and what are key areas to evaluate as part of that decision process?

Tomas Geerkens: Starting a license compliance program begins with an internal assessment to understand your current licensing landscape. Identify any pain points, potential risks, and areas where clarity is lacking. However, it’s important to recognize that you may not be aware of all potential risks — “you don’t know what you don’t know.” Start by understanding your contractual rights, such as whether your agreements have a strong audit clause. Connect with your business teams to see if the reporting and financial data received align with expectations. Consider whether there are areas where you lack visibility in terms of accuracy or completeness. Additionally, understand the potential financial impact of compliance issues, which can account for a significant underreported percentage. Review your agreements for complexities in reporting structures, such as varying rates over time, volume, or product type, as well as agreement structures with numerous amendments or side letters that could lead to challenges in accurate and complete reporting. From there, set clear strategic goals for what you want the compliance program to achieve — whether it’s better financial recovery, improved brand protection, or stronger licensee relationships. Evaluating the role of technology is crucial; consider tools that can enhance visibility and streamline processes. Additionally, standardized policies and procedures should be developed that are transparent and easy to follow. Finally, it’s vital to ensure that both your internal team and your licensees are well-informed and aligned with the program’s objectives, focusing on both the monetary and non-monetary aspects of compliance.

IP business academy: What should readers take away from this interview?

Tomas Geerkens: The key message is that licensing compliance is not just about recovering lost revenue — it’s about safeguarding your intellectual property, fostering strong relationships with your licensees, and ensuring that everyone involved understands and adheres to the terms of their agreements. By implementing best practices that are appropriate for your company’s size and complexity, you can proactively manage risks, avoid costly disputes, and build trust with your licensees. Remember, compliance is an ongoing process that requires attention to detail, commitment, and the right tools to ensure that your IP is both protected and effectively monetized.

Summary and Key Takeaways

Licensing compliance is a critical aspect of managing intellectual property, and it’s essential for companies of all sizes that license out their IP for commercialization purposes. Companies are made up of human beings, and we all make mistakes. In the complexities of day-to-day business life, ERP systems aren’t necessarily built to track IP royalty collections in detail. By performing a range of activities — from proactive reviews to catch misunderstandings or misinterpretations beforehand, reducing the need for audits and challenging settlement discussions, to making sure there are safeguards in place so that licensees can trust that the licensor is committed to the contractual terms — companies can create a more efficient and trustworthy compliance environment.

Regardless of the size of your company or the number of licensees you have, different best practices exist, ranging from scalable outreach solutions and desk reviews to more traditional full audits. The key takeaway is that a tailored approach to licensing compliance can help mitigate risks, secure financial returns, and strengthen relationships with licensees, ensuring that your IP is protected and used in a way that aligns with your business objectives.

About the interviewee:

As a Director at Connor, Tomas Geerkens helps companies enhance operational efficiency, ensure compliance, and uncover new revenue opportunities. With over a decade of experience in auditing, risk management, and business development, he supports organizations worldwide in maintaining robust contract, license, and royalty compliance.