IP Valuation is a process to determine the monetary value of subject Intellectual Property
Intellectual Property
It refers to creation of the mind, such as inventions, literary and artistic works, designs and symbols, names and images used in commerce
Types of Intellectual properties
1) Trade secrets
A piece of information, for example about how a particular product is made, that is known only to the company that makes it
It refers to specific, private information that is important to a business because it gives the business a competitive advantage in its marketplace
2) Patents
It is the granting of a property right by a sovereign authority to an inventor
This grant provides the inventor exclusive rights to the patented process, design or invention for a designated period in exchange for a comprehensive disclosure of the invention
3) Copyrights
It refers to the legal right of the owner of intellectual property
Copyright is right to copy
Original creators of products and anyone they give authorization to are the only ones with the exclusive right to reproduce the work
4) Trademarks
It is a way for a business to help people to identify the products that the business makes from products made by another business
A trademark can be name, word, phrase, Symball, logo, design or picture
It can only be used on things made by the business that owns a trademark
Identifying your intellectual property
1) identify all potential sources of your IP (brands, products and services)
2) segment and categorize all elements of your IP
3) protect your IP
4) recognize steps to take with IP that is not your own
Owners of IP
Sometimes an entrepreneur may take for granted that they own the IP rights
However, considerations such as academic affiliation, employer contract and collaborations may complicate IP ownership
Invention in IP
An invention or creation is usually thought of as belonging to the inventor, this may not always hold true
For example, if the invention was made during the course of employment, the right to it may reside with the employer
If a person is hired specifically to do work that would produce some IP, it will likely belong to the employer
IP in academic settings
The policy on IP ownership can vary greatly between workplaces, particularly with academic emplyers
Most often, the employment contract will state that the employee must assign the invention to the emplyer
However, some universities provide the option to the employee to either develop the IP themselves or assign it to the employer for development
Before you sell or develop a product from your company you should
1) determine whether the product derives from any employment you had
2) determine whether you collaborated with others on the invention (for example, scientists or trainees from other universities)
3) when all parties are identified, examine the existing contracts and policies of the employer
4) discuss with your employer about how to proceed – whether the invention must be assigned to them as the employer, or whether you own it
You can negotiate terms
Protection of your IP
1) register copyrights, trademarks and patents
2) register business, product or domain names
3) create confidentiality, non-disclosure or licensing contracts for employees and partners
4) implement security measures
5) avoid joint ownership
IP as business asset
1).IP is a business asset
2) It helps set apart your business versus your competitors
3) it also provides a stream of revenue, which you deserve to be compensated for since these are your creations
4) it makes good business sense
5) protect your IP
6) restrict others from copying, using, distributing and profiting from it without your consent
Need of IP Valuation
1) valuation of a company for the purpose of merger, acquisition, joint venture or bankruptcy
2) negotiations to sell or license intellectual property rights
3) support in situations of conflict, such as court proceedings or alternative dispute resolution mechanisms (such as arbitration)
4) fund raising through bank loans or venture capital
5) assessing internal decision making
6) for accounting and taxation purposes
Involvement of consultants in IP valuation
Legal, technical, financial, marketing and strategic expertise
IP score
It is a unique evaluation tool developed to provide a comprehensive evaluation of patents and technological development projects
IP score provides
1) a basis for identifying the conditions that create value for the patent or development project
2) a strong evaluation profile, with tried and tested assessment factors and new reports, provides a comprehensive evaluation of the various conditions determining the value of a patent or development project
3) a quantitative financial module works out a financial forecast and thereby determines the financial order of magnitude in the overall qualitative evaluation
IP Tradeportal
It is a developed portal with the purpose of helping businesses to better exploit their knowledge by trading their IP rights
On the portal page you can find a set of tools for trading rights, including on valuation
IP Panorana
It consists of a set of e-learning modules, one of them dedicated to valuation of IP assets
IP Healthcheck
Booklet on agreeing a price for IP rights to help companies on the valuation of their IP assets in the context of business transactions
This method is based on the principle that there is a direct relation between the costs expended in the development of the IP and it’s economic value
Reproduction cost method and Replacement cost method
In both methods valuer should take today’s price into account and not historical cost
2) Market-based method
This method relies on the estimation of value based on similar market transactions (eg similar license agreements) of comparable IP rights
Data on comparable or similar transactions may be assessed from following sources
a) company annual report
b) specialised online databases such as royalty source, IP research associates
c) in publications dedicated to licensing and royalties such as licensing economic review
d) in court decisions concerning damages
3) Income-based method
It is based on the principle that the value of an asset is intrinsic to the (expected) income flows it generates
After the income is estimated, the result is discounted by an appropriate discount factor with the objective to adjust it to the present circumstances and therefore to determine the present value of the IP
Discounted cash flow method and Relief from royalty method
A discount rate is applied to determine the present value of asset
4) Option-based method
The option methodology takes into consideration the options and opportunities related to the investment
It relies on option pricing models for stock options to achieve a valuation of a given IP asset
Intellectual property valuation by qualitative approach method
It does not rely on analytical data
Valuation is performed through the analysis of different indicators with the purpose of rating the IP right, ie of determining its importance
Factors considered for qualitative approach
1) legal aspects
2) technology level of innovation
3) market details
4) company organization 5) geographic coverage of the reference market
The value of an IP asset represents the potential future economic benefits to the IP owner or authorized user
