Intellectual Property Valuations in the U.KAAA IPRIGHT5
Intellectual property can be considered a company asset, and valuations can help determine its genuine value. IP is frequently the most valuable asset inside a corporation, and in today’s environment, innovation and technology mean that there is some aspect of IP in practically every commercial engagement that a firm engages in. The value of intellectual property assets can be valuable when a company is looking for outside investment, investigating licensing and joint venture options, mergers, and acquisitions, or for other tax, financial, or marketing objectives.
Trademarks and designs can be used to protect a brand (both registered and unregistered). There are a variety of different assets to consider within an IP portfolio, including:
- research and development
- trade secrets
- databases and customer lists
The World Intellectual Property Organization and the UK Intellectual Property Office, among others, give guidelines on evaluating IP assets, and the assets must meet the following requirements:
- be separately identifiable
- tangible evidence of the 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
To have a quantitative value, IP assets must create measurable economic advantages and increase the value of other assets with which they are related.
When it comes to IP valuations, there are several methodologies available, including quantitative (cost-based, market-based, and income-based) and qualitative (ratings, scorings, value indicators). All approaches have merits and limitations, but given the essentially non-monetary nature of IP values, qualitative methods are typically utilized.
Method of IP valuations
The specific method chosen for a value will be determined by:
- what is the purpose of the valuation (i.e. licensing, sale, investment)
- what IP assets are being considered (i.e. patents, trademarks, goodwill, copyright)
- who the valuation is being prepared for (i.e. internal v external)
Other business conditions, such as potential markets, rivals, and market trends/economies, must also be taken into account when valuing a company. An extensive IP audit will also be necessary.
A thorough and commercial IP valuation can draw on knowledge from a variety of sources, including IP attorneys, in-house teams, and brand valuation specialists, to ensure that any value is fair and financially feasible.