Valuation of IP rights is part of the good management of IP within an organisation. Indeed, knowing the economic value and importance of the IP rights you create and develop assists in the strategic decisions to be taken on the assets, but also facilitates the commercialisation and transactions concerning IP rights.
There are many business situations where valuation is required:
- valuation of a company for the purposes of a merger, acquisition, joint venture or bankruptcy;
- negotiations to sell or license IP rights;
- support in situations of conflict, such as court proceedings or alternative dispute resolution mechanisms;
- fund raising through bank loans or venture capital;
- assisting internal decision making;
- for accounting and taxation purposes.
Different approaches of IP valuation are used by organisations. Generally, these approaches are divided in two categories: the quantitative and qualitative valuation.
While the quantitative approach relies on numerical and measurable data with the purpose to calculate the economic value of the IP, the qualitative approach is focused on the analysis of the characteristics (such as the legal strength of the patent) and uses of the IP.
Quantitive approach can be grouped in three methods:
- 1. cost-based method;
- 2. market-based method;
- 3. income-based method.