The RESIDUAL EXCESS EARNINGS METHOD is used when the business financial elements are known for the patent or patent portfolio under evaluation. It is a holistic approach that computes the company’s equity value for tangibles and intangibles assets. First the return on the tangible assets is calculated. Second the return on the tangible assets is subtracted from the company’s equity or total enterprise value. Third the intangible value is capitalized to determine the total value of the intangible assets.

The COMPARABLE RESIDUAL EXCESS EARNING METHODS is used for patent portfolios when only the industry average financial elements are known. These numbers are typically derived from proprietary databases wherein one can obtain the equity values from similar companies. What is needed for the calculation is the equity value of both the tangibles and intangibles assets. As before the process is to calculate the return on the tangible assets. Then the return on the tangible assets is subtracted from the company’s equity. Finally the intangible value is capitalized to determine the total value of intangible assets.