By Ruth Fischer

1. Licensing and IP Valuation Ruth Fisher, PhD www.QuantAA.com

4. Valuation Effort Required Large Very High Litigation Large High Intra-Company Transfers Large High Joint Ventures Large High Tax-Related Ventures Level of Effort Required Expected Degree of Scrutiny Circumstance

5. Valuation Effort Required (cont.) Medium Medium R&D Investment Medium Medium In-Kind Contribution Medium Medium Licensing (Sale & Purchase) Medium Medium Business Decision Making Level of Effort Required Expected Degree of Scrutiny Circumstance

6. Valuation Effort Required (cont.) Source: Patrick H. Sullivan, Profiting from Intellectual Capital: Extracting Value from Innovation . John Wiley & Sons, Inc., 1998, p.183. Small Low Initial Estimate Medium Medium Exploitation Potential Medium Medium Portfolio Management Level of Effort Required Expected Degree of Scrutiny Circumstance

10. Fields of Use Matrix $50M $100M $75M Latin America $0 $200M $100M Household Products $750M $50M $500M Entertainment $50M $100M $250M Food Asia Europe U.S.

13. Discount Factors: A Graphical Illustration

14. Discounted Factor

15. Present Discounted Value: A Tabular Example $2.61 ( ↓ 48%) 0.20 0.30 0.44 0.67 1.00 Discount Factor r = 50% $3.36 ( ↓ 33%) 0.41 0.51 0.64 0.80 1.00 Discount Factor r = 25% $4.17 ( ↓ 17%) 0.68 0.75 0.83 0.91 1.00 Discount Factor r = 10% $5.00 $1 $1 $1 $1 $1 Nominal $ PV Period 5 Period 4 Period 3 Period 2 Period 1

16. Present Discounted Value: A Tabular Example (cont.)

17. Present Discounted Value: Another Tabular Example $2.48 ( ↓ 26%) $2 $2 $1 $0 $0 Nominal $ $4.24 ( ↑ 26%) $0 $0 $1 $2 $2 Nominal $ $3.36 $1 $1 $1 $1 $1 Nominal $ 0.41 0.51 0.64 0.80 1.00 Discount Factor: r = 25% PV Period 5 Period 4 Period 3 Period 2 Period 1

18. Present Discounted Value: Another Tabular Example (cont.)

20. Sample Discount Rates Patrick H. Sullivan, Profiting from Intellectual Capital: Extracting Value from Innovation . John Wiley & Sons, Inc., 1998, p.339. Gordon V. Smith and Russell L. Parr, Valuation of Intellectual Property and Intangible Assets, 3 rd Edition. John Wiley & Sons, Inc., 2000, p.506. Source 0-30% 25% Advanced 30-50% 30-40% Intermediate 50-75% 50% Basic Discount Rate 2 Discount Rate 1 Stage of Development

25. Size of Product Market Total Population Old Market = New Market Marginal Change Total Population Old Market Revolutionary Change New Market

27. Contribution of IP to Profits

31. Product Lifecycle

32. Profit Allocation: Licensor v. Licensee Profit from Invention Licensor’s Share Licensee’s Share

37. Contact Information