Intellectual property valuation is a process to determine the monetary value of intellectual property assets. IP valuation is required to be able to sell, license, or enter into commercial arrangements based on IP. It is also beneficial in the enforcement of IP rights, for internal management of IP assets, and for various financial processes.
Intellectual property assets are part of the non-physical property of a business. They are a sub-set of intangible assets and distinguished from other intangible assets by the fact that they are created by law. As such, IP assets are legally protected and can be legally enforced. These can be independently identified, are transferable and have an economic life (in contrast to their legal life, which is generally longer than their economic life). They include patents, industrial designs, trademarks, copyright, and trade secrets. [1]
Intellectual property derives its value from a wide range of parameters such as usefulness, market share, barriers to entry, legal protection, profitability, industrial and economic factors, growth projections, remaining economic life, and new technologies, all of which will inhere in the valuation. The value of an IP asset essentially comes from the right the owner of that asset has to exclude competitors from using it. For an IP asset to have a quantifiable value it should: [2] [3]
An IP valuation - or economic appraisal - is prepared, for example, for transactions, merger and acquisition, pricing and strategic purposes, financing securitization and collateralization, tax planning and compliance, and litigation support.
Finally, the information is devoted to be turned into financial models to estimate the fundamental value of a particular type of intellectual property based on such adapted International Valuation Standards.
In order to be able sell, license or enter into any commercial arrangements based on IP, the owner need to be able to put a value on an IP asset. IP valuation is also beneficial in the enforcement of IP rights, for internal management of IP assets, and for various financial processes.
The valuation process necessitates gathering much more information as well as in-depth understanding of economy, industry, and specific business that directly affect the value of the intellectual property. Therefore, such information may be gathered from external and / or internal sources
To be able to value an IP asset, the asset should meet the following conditions: [2]
The valuation analysts use numerous approaches in order to reach a reasonable indication of a defined value for the subject intangible assets on a certain date which is referred to as the valuation date. The most common approaches to estimate the fundamental or fair value of the intellectual property are defined as the following: [2] [1]
Regardless of the method used, the valuation process requires gathering much information about the IP asset, as well as an in-depth understanding of the economy, industry, and specific business that directly affect its value. This information can be obtained by conducting an event-driven IP audit, as well as background research.
This article incorporates text from a free content work. Licensed under CC-BY-4.0. Text taken from Valuing Intellectual Property Assets , WIPO.
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The following outline is provided as an overview of and topical guide to intellectual property:
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