Relief From Royalty

This method is based on the assumption that the business is not own the patent under consideration and thus has to pay a royalty to the owners of the patent for its use. The value of the patent is considered to be the capitalized value of the after-tax royalties that the company is relieved from paying as a result of ownership of the patent. An example is shown in the “Relief From Royalty” figure. In this figure EAT is the earnings after taxes and DR is a discount rate for the technology.