Audit of compliance with licence agreements
Company that owns rights to registered trademarks on the territory of the RF (well-known cartoon characters) concluded a number of licence agreements for using its trademarks: imprinting logos on promotional items, production of sweets and other confectionery, manufacturing and sales of children’s toys and issue of children’s books based on the cartoons.
Under the licence agreement, payment for using the trademark was based on revenue from sales of products released under the trademark; such revenue was disclosed in Licensee’s quarterly reports.
Licensee asked us to conduct a sample audit of information contained in those reports.
Based on results of audits of some licensees, we found violations related to royalty calculation and licensed territory of sales; we also detected cases of product shipment to affiliated entities at an understated price, failure to pay royalties in time and other violations.
Based on the violations detected, we calculated damage incurred by the Licensee (unpaid royalties) and fines provided by the licence agreement.