Intellectual property can be business assets and valuations can assist in determining their true value. IP is often the most valuable asset within a business, and innovation and technology in today's world means that there is some element of IP in almost every commercial interaction that a busines engages in. The value of IP assets can be useful when, for example, a business is seeking outside investment, exploring licensing and joint venture opportunities, mergers and acquisitions or other tax, finance or marketing purposes.
A brand can be protected by trade marks and designs (both registered and unregistered).
There are also a number of other assets within an IP portfolio to consider including:
- goodwill
- know-how
- research and development
- trade secrets
- databases and customer lists
The World Intellectual Property Organisation and UK Intellectual Property Office (amongst others) provide guidance on evaluating IP assets, and the prerequisites are that the assets should:
- be separately identifiable
- tangible evidence of existence
- created at an identifiable point in time
- be capable of being legally enforced and transferred
- should be able to be sold independently of other business assets
- subject to destruction or termination at an identifiable point in time
For IP assets to have a quantifiable value, they should generate a measurable amount of economic benefits and enhance the value of other assets with which they are associated.
There are a number of valuation methods available when considering IP valuations including quantitative (cost-based, market-based, income-based) and qualitative (ratings, scorings, value indicators). All methods have their advantages and disadvantages, although qualitative methods are usually used for IP valuations given the largely non-monetary nature.
How to choose a method
The exact method right for a valuation will be determinative on:
- what is the purpose of the valuation (i.e. licensing, sale, investment)
- what IP assets are being considered (i.e. patents, trade marks, goodwill, copyright)
- who the valuation is being prepared for (i.e. internal v external)
Consideration also needs to be given to other business circumstances at the time of valuation, potential markets, competitors and market trends/ economies. An in-depth IP audit will also be required.
There is no 'magic formula' and the methods that can be employed are diverse, with many factors to be considered.
Expertise
A comprehensive and commercial IP valuation can draw on expertise from a number of sources, including IP lawyers, in-house teams and brand valuation experts, ensuring that any value is fair and commercially viable.
Originally Published by London Business Matters
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.