Value Matrix In order to fine tune the analysis to arrive at a specific reasonable comparable royalty rate, a value matrix is constructed as shown in the “Value Matrix” figure. Patents describing products very close to the patent under evaluation are pairwise placed on the matrix (shown as yellow dots). Once the pairwise [...]
The MARKET APPROACH is based on the economic principle that in a free market system the supply and demand factors will drive the price of any good to point of equilibrium. Intangible assets are valued by reference to transactions involving similar assets that have occurred recently in similar markets. The market-based valuation method [...]
OPTIONS METHODS To take into account the variations in the assumption values that go into the income method calculations, more elaborate income-based valuation technologies utilize decision trees, options and Monte Carlo simulations to improve the estimated values. Decision Tree Approach The DECISION TREE APPROACH is one of several that considers patents as options. [...]
Comparing Residual Excess Earnings Method with Technology Factor Method 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 [...]
Technology Factor Valuation Process NPV USING A TECHNOLOGY FACTOR The technology factor is a measure of the extent to which incremental cash flow derived from the practice of a technology is based on that technology asset itself. It is measure the fair market value of the intellectual property. The” Technology Factor Valuation Process” [...]
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 income or net present value (NPV) approach is based on the cash flow that results from introducing the covered technology to the marketplace. The intellectual property value as calculated by this method is the present value of the expected future income stream. The theory behind this approach is that the licensee will [...]
The cost method is based on the licensor’s investment in the technology. The cost approach is based on the economic principle of substitution. An investor will pay no more for an asset than the cost to develop or obtain another asset of similar utility. The value of the intellectual property is equal to [...]
When considering valuation methods for patents and portfolios there are some fundamental concepts that need to be understood. Fair market value is one of them. Fair market value is defined as a price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to [...]
A great deal has been written on the valuation of intellectual property. The best resources are available from the World Intellectual Property Organization (WIPO) and the Licensing Executives Society International. The focus is on three primary means to determine how much intellectual property is worth. These are cost approach, and income approach, and [...]
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