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Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles
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Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles

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  • 1. Valuing the Intangible: Where to Start? The Full Family of Intellectual Property and Other Intangibles Sponsored by Sheppard Mullin December 22, 2009 Presented by: CONSOR ® Intellectual Asset Management www.consor.com
  • 2. Topics Why are intangibles important in today’s economy? Why are they relevant to your practice? Defining terms: Intangible Assets and Intellectual Property Intangibles as common thread in and out of litigation Fundamental problem: what are they worth? How are intangibles valued in practice? How can intangible-related damages be quantified?
  • 3. Why Should I Care? Commercial and litigation business clients rely on protecting and growing their brands, leveraging them through licensing; or guarding their technical advances and unique product features from competitors. Beyond specialized IP law practices, business, commercial, tax and estate practitioners increasingly have to be involved in identifying, protecting, applying, and defending intangibles owned by businesses and individuals.
  • 4. Intangible Assets and Intellectual Property Intellectual Property are the various types of rights given specific legal protection. Traditionally including: Copyrights Patents Trademarks And increasingly extended to: Trade secrets Rights of publicity
  • 5. Business IA and IP Intellectual Property PATENTS COPY RIGHTS TRADE MARKS TRADE SECRETS Intangible Assets Data & Knowledge Bases COPY RIGHTS Customer & Vendor Relations Proprietary Software Internet Assets
  • 6. IP Valuation Tools and Methodologies Traditional Methodologies Market Approach Cost Approach Income Approach Proprietary Methodologies VALMATRIX ® VALCALC ® BVE Q ™
  • 7. Case Studies Case #1 – Woody Allen: Valuing Celebrity Rights and Rights of Publicity Case #2 – adidas: The Largest Trade Dress Award in History Case #3 – Tower Records: Extracting Value in Bankruptcy Case #4 – The Marlon Brando Estate: Estate Planning and Tax Issues Case #5 – Sara Lee vs. Jimmy Dean: Valuing Intangibles in Contract Disputes Case #6 – IP in Corporate Financing Deals
  • 8. Case Study #1: Woody Allen Woody Allen Litigation – unauthorized use of name Comparable product endorsement fees Publicity rights infringement Consumer impressions Market Approach $5.0 Million Client: Context: Components: Cause: Approach: Concept of Value: Total Damages:
  • 9. Case Study #1: Woody Allen (cont’d) The establishment of value for these intellectual property rights, both for a deal structure and in litigation Customs and practices regarding rights ownership, usage, and fee structures Econometric modeling of litigation outcome Precise prediction of settlement amount
  • 10. Case Study #2: adidas adidas Trademark / trade dress infringement Valuation of trademark Establishment of trade dress component Establishment of total damages Valuation of damages to trade dress Components of value Market Approach, Relief from Royalty $304.6 Million Client: Context: Components: Approach: Concept of Value: Awarded Damages:
  • 11. Case Study #2: adidas (cont’d) Largest trademark and trade dress award in history Defendant: Payless Shoes Calculated actual damages of $31.3 million Product sourcing fees of $10 million disallowed since Payless could have procured sourcing independent of adidas Data related to actual sales and licensing activities were critical Judge reduced damages to 2x our damage calculations
  • 12. Case Study #3: Tower Records Tower Records Bankruptcy Trademarks Domain names Website / Internet platforms Databases Franchise agreements Sequestered auction Liquidation $4.5 Million Client: Context: Components: Approach: Concept of Value: Total Damages:
  • 13. Case Study #3: Tower Records (cont’d) Extracting value in bankruptcy Sale 9 months after store closures Targeted global IP asset sale marketing campaign Estimated asset value $1.0 – 2.0 million 8 international bidders, 36 hour auction process + / - $4.5 million
  • 14. Case Study #4: The Estate of Marlon Brando The Estate of Marlon Brando Estate planning and tax issues Post-mortem rights of publicity Estate value IRS audit Analysis of historical income Income approach $1.4 million Client: Context: Components: Cause: Approach: Concept of Value: Total Value:
  • 15. Case Study #4: The Estate of Marlon Brando (cont’d) Estate planning and tax issues Value of post-mortem rights of publicity Valuation to meet IRC § 2031 Historical endorsement deals to predict future revenue Present value of 10 year future stream of revenue set at $1.35 million
  • 16. Case Study #5: Sara Lee vs. Jimmy Dean Sara Lee Contract dispute Valuation of stock distribution Valuation of dividend income Valuation of payments Valuation of retirement benefits Trademark infringement Discounted cash flows Income Approach Enterprise Valuation Client: Context: Components: Cause: Approach: Concept of Value:
  • 17. Case Study #5: Sara Lee vs. Jimmy Dean (cont.) 10,000,000 Retirement benefits $ 325,000,000 TOTAL VALUE 85,000,000 Dividend income 30,000,000 Payments $ 200,000,000 Stock distribution Estimated Value Category
  • 18. Case Study #6: IP Securitization Global Real Estate Services Franchisor Several hundred million dollar IP-backed securitization Trademarks and brand assets Franchise services Corporate restructuring Revenue projections Royalty cash flow allocation Market approach Income approach Client: Context: Components: Cause: Approach: Concept of Value:
  • 19. Case Study: IP Securitization Goal: Secure financing for corporate expansion backed by the company’s cash flows and IP Task: Identify and value the bundles of intangibles to be transferred and/or licensed to the special purpose entities (SPE) that will hold the IP and provide the franchise support services: Performed a Brand Apportionment Analysis to allocate value between the IP and the Franchise Support Services being provided Determined the fair market value of the fully paid-up IP license to be granted back to the operating company Determined the total value of the IP in the US to enhance investor confidence Interfaced with the investment bank to support the stress testing scenario analysis– an essential element to assess the risk profile for the rating agencies and surety providers
  • 20. Discussion of Current Cases & Questions

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