VALUING INTELLECTUAL PROPERTY (IP)
The valuation of intangible assets or intellectual property (IP) is a complex process. It involves a myriad of potential approaches or methods, depending upon the type of IP and available market data. In addition, the key factors affecting the valuation process follow.
- Type of IP - Patents, trademarks, copyrights, trade secrets, and domain names all have different valuation methods.
- Market Demand – Commercial potential and demand for the IP in the market.
- Legal Protection – Strength, duration, and enforceability of the IP rights.
- Revenue Potential – Ability of the IP to generate income through licensing, sales, or product development.
- Competitive Advantage – Exclusivity and differentiation it provides over competitors.
- Development Costs – Includes initial R&D, architecture and coding, legal, annual filings, and ongoing maintenance.
- Risk Factors – Potential or existing infringers, expiration timelines (public domain), and market obsolescence.
- Industry Data - Availability and access to comparable sales and other market data.
- Geographical Scope – Reflects international acceptance and protections.
- Licensing – Viability of usage rights and realistic licensing applications.