The valuation of IP continues to be a very difficult and complex
subject. Determining the correct value of IP is important for the
running of a business (to ensure the value of IP warrants the
resources dedicated to its protection), the sale or purchase of a
business (to ensure the correct price for both the buyer and
seller), accountancy issues (to determine the overall value of a
company or for tax purposes) as well as a number of other
Due to the intangible nature of IP, particularly assets such as
know-how, customer lists and business methods, the valuation of IP
has always been notoriously difficult. This is made abundantly
clear by the fact that no one method is universally accepted as
correct. Generally, methods of valuation fall into three
Market based: Value is determined by reference to similar
market transactions. However, IP is often sold as part of a larger
transaction, making its precise value hard to determine.
Additionally, the elements of a transaction relating to IP are
often highly confidential.
Cost based valuation: Consideration is given to the cost to
create or to replace the relevant IP. However, this method is
simplistic at best and does not take into account the real time
value of the IP, rather just the initial costs of creation or
Valuation based on estimate of future economic benefit: This
method includes a number of separate methods within it, such as the
relief from royalty method where the value is determined by the
royalty a purchaser would be willing to pay for a licence of the
relevant IP. Again, these methods are generally based on certain
assumptions and, as a result, carry risks.
Valuing IP is undoubtedly not an area with a "one size fits
all" approach or, it would seem, a definitively right answer
in any given situation. Producing an accurate valuation requires a
detailed understanding of the legal, accounting and financial
nature of IP. Businesses, particularly those that are dependant on
IP, would be wise to instruct a specialist IP valuer to carry out a
regular review of their IP rights. Collas Crill has worked with
leading individuals in the field of IP valuation, often so critical
in offshoring IP, and can provide a unique solution for your IP
needs in the Channel Islands.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As reported in the market updates section of this newsletter, the UAE Ministry of Economy recently reviewed the fees charged by its various departments, including the Trade Mark, Patent and Copyright Office.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).