When an audit clause is refused: what to do first
An audit clause gives the licensor a contractual right to inspect records that prove correct use, correct royalty calculation, or correct scope of a licence. A refusal does not end the right. It starts a short window in which the licence itself, not the underlying IP registration, decides what happens next.
What the refusal actually blocks
An audit clause is a creature of contract, not of statute. No EU regulation compels a licensee to open its books. What the clause verifies, however, tracks the right that was licensed in the first place.
If the licence covers a European Union trade mark, the registered right sits in Regulation (EU) 2017/1001 (EUTMR), and the audit typically checks use, not registration.
If the licence covers a computer program, the reproduction and adaptation rights being verified come from Directive 2009/24/EC.
If the licence covers a database, the sui generis right the audit is meant to protect is set out in Directive 96/9/EC.
If the licence covers a unitary patent, the single protection the audit is meant to confirm follows Regulation (EU) No 1257/2012.
The refusal itself is governed by none of these acts. It is governed by the clause, and by whichever national contract law the licence names.
What changes once the refusal happens
Three things change immediately. The notice period the clause sets for a response starts running, whether or not either side treats it as running. The licensor's evidence base narrows to whatever was already collected before the refusal. And the dispute moves from a compliance question to a breach question, which usually carries a different remedy under the licence.
What to do first
- Re-read the audit clause before responding. Confirm what it actually entitles the licensor to see, and by when.
- Send a written notice that records the refusal and the date it occurred. The person who administers the licence should sign it, not a general manager.
- Check the notice or cure period the clause sets. Calendar it immediately, in writing, with the counterparty copied.
- Identify which right the licence actually covers — a trade mark, a computer program, a database, or a patent. The evidence that matters differs by right.
- Escalate to the forum the licence names, only after the notice period runs out. Do not move straight to litigation or arbitration.
- Preserve the records the audit would have checked, even while the refusal stands. A later forum will ask why they were not preserved.
Who decides, and on what evidence
The forum named in the licence decides. The registry that recorded the underlying right has no say in the refusal itself.
| Question | Where the answer sits |
|---|---|
| Who decides | The forum the licence's dispute-resolution clause names |
| On what evidence | Records the clause defines as auditable, not records at large |
| Which right is being tested | The registered or protected right the licence actually covers |
| Which deadline runs first | The notice or cure period the clause itself sets |
If the asset behind the licence differs
The first steps above hold regardless of the right. The escalation path changes.
If the licensed asset is a trade mark and the licensee is also a distributor, the refusal often masks a use dispute rather than an evidence dispute. A distributor registered your brand locally trade mark sets out how that variant plays out.
If the person refusing access is a departing founder rather than a contractual licensee, the audit question sits inside a wider ownership dispute. When a founder leaves with the prototype: what to do first covers the parallel procedure.
If the written licence is paired with a smart contract that keeps executing regardless of the refusal, the order of steps changes again. What to do first in this situation explained sets out that sequence.
What this page does not resolve
This page does not resolve royalty calculation once access is granted, and it does not resolve a refusal that has already turned into litigation. It does not set the length of a notice period, since that figure lives in the clause, not in statute.
If the audit later produces a report that names individuals, a separate set of rights takes over. If you are named in a report and what follows then depends on data-protection rules, not on the licence.
Related situations
A closely related failure mode is covered in When a sublicence appears without consent in practice, where the dispute starts one step earlier, before any audit is even requested.
Verified
Sources current as of publication. Primary sources: Regulation (EU) 2017/1001 (EUTMR); Directive 2009/24/EC; Directive 96/9/EC; Regulation (EU) No 1257/2012.
Frequently asked questions
What is the first step when an audit clause is refused?
Read the clause again before responding, then send a written notice that records the date of the refusal. The clause, not the underlying registration, sets what happens next.
Which deadline is already running?
The notice or cure period the clause itself sets starts on the date of the refusal, whether or not either side has calendared it.
Who decides, and on what evidence?
The forum named in the licence's dispute-resolution clause decides, using the records the clause defines as auditable rather than records at large.