ASSESING THE VALUE OF IPS

Question 1

When do you estimate the value of a patent?

Answer 1

• During M&As, incorporations of a new venture, sale of shares etc.
• To secure financing (collateral)
• When selling/buying the IP or granting a license
• In lawsuits or legal disputes

Question 2

Characteristics of a Patent as an asset:

Answer 2

The asset must be clearly/separately identifiable from the rest of the company or product/service (well described)

Question 3

Information to consider in the estimation

Answer 3

Legal
Technical
Commercial

Question 4

*Strength of the patent (requirements, risks, causes)
* Status (process, extensions, residual life)

Answer 4

Legal

Question 5

• Development stage
• Imitability
• Ease of monitoring and enforcement

Answer 5

Technical

Question 6

• Size and structure of potential market
• Market trends
• Premium prize for innovation
• Similar transactions concerning IP assets that happened in the market

Answer 6

Commercial

Question 7

Three Evaluation methods

Answer 7

Income method
Markt method
Cost method

Question 8

The owning of the IP generates extra revenues or cost-savings. The IP value
should quantify the present value of all the future differential cash flows earned by the IP

Answer 8

Income method

Question 9

PROS: reflects the value of future income generated by the asset

CONS: future cash flows are presumed/forecasted, thus arbitrary or possibly wrong

Answer 9

Income method

Question 10

The value of the IP should be comparable to the value of similar IPs observed in past
negotiations.

Answer 10

Market method

Question 11

• PROS: reflects real market prices of IP assets
• CONS: because patent transactions are few/private, the method is difficult to apply for lack of
  data. More commonly used for valuing brands.

Answer 11

Market method

Question 12

• RATIONALE: The value of the IP should represent the costs that would be necessary to reconstruct the IP asset today.

Answer 12

Cost method

Question 13

• PROS: actual data are used; no forecast
• CONS: the costs incurred reflects what was paid, but tells nothing about the perspective ability of
  the IP to turn produce a real extra-income.

Answer 13

Cost method

Question 14

• Different methods exist. No single method is perfect.
• Often several methods are used in combination to define a range of possible values.
• In practice, the range can be rather wide.

Answer 14

TRUE