The intellectual property portfolio of a company is an excellent source of potential value. In addition to the value an organization can achieve by using intellectual property in its own products and services to generate excess profits, intellectual property can also create value opportunities outside of a company. These strategies a company can [...]
Portfolio Preservation by Company Size When the U.S. patent data was filtered by company size, it was found that companies with over $10 billion in sales filed about 10x more than smaller entities with sales <$100 million. Also, as the “Portfolio Preservation by Company Size” figure shows, larger entities also retain more of [...]
The litigated data is presented to contrast the other patent movement. It is useful to see that the scale of litigation (and invalidation due to litigation) is quite small compared to entities simply choosing not to pay fees. Patent Litigation Frequency With respect to litigation of patents in a portfolio, the percentage of [...]
Another way to get a sense of how much art is typically retained for offensive (litigation and dissuading honest competition), defensive (cross-licensing), licensing-out, and barter (ventures) use, as well as how much is abandoned, the following benchmarks are provided. Benchmarking results by Thom Kobayashi show that companies tend to let roughly equal portions [...]
Lognormal Distribution Of Asset Values When looking at large portfolios companies participating in the Gathering 1 network found that the value of patents was log normally distributed. Such a curve is shown in the “Lognormal Distribution Of Asset Values” figure. Further work showed that a typical unmanaged IP portfolio has: 1% of its [...]
Step 3: Determining Ultimate Value Though quantitative tools provide evaluation/pricing starting point, they must be used in conjunction with careful evaluation of qualitative factors to ultimately determine fair market value. Those factors are instructive as to a fair split of excess benefits between the negotiating parties. As well, and the actual budget constrained, [...]
Qualitative Factors in IP Valuation Step 2: Applying Approaches Assuming the availability of adequate data, income approaches often provide the most useful measure of value. Of particular significance is incremental income approach, which compares the intellectual asset covered returns with the returns the next best alternative. Products or services containing unique intellectual [...]
Given this background of the three general methods of valuation, the process of valuation of intellectual assets thus proceeds in several steps: Step One: Choose An Approach Optimally, an intellectual asset valuation, just like valuation performed when selling a home, should employ each of the three approaches noted above. Data and information [...]
Cost approaches are utilized under the premise that a prudent licensee would pay no more for the intellectual property at issue than the cost to obtain, either by purchaser by construction, an exact replica of the subject technology or an alternative that achieves the same function. Two types cost methodologies predominate: Reproduction cost [...]
Market approaches examine the terms of comparable technology transfers to arrive at a fair transfer price and terms for the intellectual asset under consideration. Arm’s-length transactions between nonaffiliated entities best cover the technology under evaluation. A host of related transactions within a limited price range provide strong evidence of what the market will [...]
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