Perhaps you are thinking of selling, buying, investing or advising on a transaction in which valuation of intellectual property is required?
This article sets out seven questions to review with specialist advisers.
Valuation is a complex subject.
To simplify the discussion we’ll use the term intellectual property, though broadly defined. That term is used instead of using additional technical terms – such as intangible assets (as used in accounting) or intellectual capital (as used in management consultancy).
Answer most of these seven questions and you’ll be well on your way towards proper evaluation, if not valuation, of specific intellectual property (“IP”).
Who is interested in the IP valuation?
Creator, author, developer- Buyer
- Seller
- Valuer
- Financier
- Accountant
- Lawyer
- Investor
- Insolvency specialist
- Australian Taxation Office
- Parliament
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Creator, author, developer2. Why is there an IP valuation need?
- Commercialisation strategy or business plan development
- Mergers and acquisitions (M&A), ie business sale or purchase
- Business management and decision making
- Litigation – quantification of damages or other pecuniary remedy
- Finance and securities – eg to not over-finance or under-finance
- Insurance – eg to work out how much insurance is appropriate
- Employee incentive shares or share options
- Tax considerations (eg capital gains)
- Consultancy report preparation
- Insolvency – settling arrangements against potential insolvency
3. What information has been gathered for the IP valuation?
- Purpose of the IP
- Commercial profile of the IP
- Financial profile of the IP
- Registrations, contracts, documentation and other elements of the legal profile of the IP
4. What IP valuation process is appropriate?
- Selection of a valuation method is a later stage step in the valuation process
- No valuation method is completely objective or perfect.
5. How will valuation differ for different types of IP (eg patent, copyright, trade marks, domain names, confidential information)?
6. What IP valuation methods are available for the IP?
7. Which is the most appropriate valuation method in the situation?
Clearly, proper assessment of the value of IP needs review of the specific relevant context, perspectives, and audiences as overviewed in this article.
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