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IP VALUATION – UNDERSTANDING THE
FINANCIAL VALUE OF IP ASSETS
Efrat Kasznik, Founder & President
Foresight Valuation Group...
2Foresight Valuation Group © 2015
About Me: Efrat Kasznik
¨  Founder and President, Foresight Valuation Group, a Silicon-...
3Foresight Valuation Group © 2015
Webinar Outline
¨  Why is IP Valuation So Challenging?
¨  When are IP Assets Being Val...
4Foresight Valuation Group © 2015
Why is IP Valuation So Challenging?
¤  Internally-grown IP Assets are NOT valued annual...
5Foresight Valuation Group © 2015
Method Description Advantages Disadvantages When Used
Market
Based on market
transaction...
6Foresight Valuation Group © 2014
When Are IP Assets Being Valued?
IP
Valuation
Funding
Buying/
Selling
Licensing
Pre- M&A...
7Foresight Valuation Group © 2015
Reporting (Compliance) Situations:
IP Valuation is Mandatory
IP Assets
Financial/Tax
Rep...
8Foresight Valuation Group © 2014
Patents
Patents
+Know How
Technology/
product
IP Holder IP Type
Transaction
Type
Purpose...
9Foresight Valuation Group © 2014
Valuation Purpose
IP Assets Assessment =
Evaluation
Valuation Scenario &
Analysis
How We...
10Foresight Valuation Group © 2015
Case Study: Patent Acquisition in Litigation
¨  Litigation scenario:
¤  Company A: a ...
11Foresight Valuation Group © 2014
Patent Acquisition Case Study
Company A:
Large LED Player
Company B:
Chinese LED
Manufa...
12Foresight Valuation Group © 2015
Range of Patent Value Scenarios
¨  Value to Company C (Seller):
¤  Development cost (...
13Foresight Valuation Group © 2015
Key Takeaways
¨  There’s an IP Valuation Gap:
¤  Most IP Assets are not valued on a r...
THANK YOU!
Efrat Kasznik
President, Foresight Valuation Group
ekasznik@foresightvaluation.com
www.linkedin.com/in/ekasznik...
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Kasznik patexia webinar 13_aug2015 for posting

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IP Valuation: Understanding the Financial Value of IP Assets

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Kasznik patexia webinar 13_aug2015 for posting

  1. 1. IP VALUATION – UNDERSTANDING THE FINANCIAL VALUE OF IP ASSETS Efrat Kasznik, Founder & President Foresight Valuation Group, LLC August 13th, 2015Foresight Valuation Group © 2015
  2. 2. 2Foresight Valuation Group © 2015 About Me: Efrat Kasznik ¨  Founder and President, Foresight Valuation Group, a Silicon-Valley based IP valuation, strategy and start-up advisory firm. ¨  IP valuation and strategy expert, with 20 years of experience ¨  Lecturer on IP Strategy, Stanford Grad. School of Business (GSB) ¨  Chair, Internet of Things (IoT) Committee, Licensing Executives Society (LES USA-Canada). ¨  Listed on IAM 300 list of top IP strategists: 2013, 2014, 2015. ¨  Co-founder and adviser to startups, incubators and funds in the US and Europe ¨  Conference speaker and regular contributor to VenureBeat, Biz Journal, IAM Magazine, Reuters and other IP/business publications.
  3. 3. 3Foresight Valuation Group © 2015 Webinar Outline ¨  Why is IP Valuation So Challenging? ¨  When are IP Assets Being Valued? ¨  What is the IP Valuation Context? ¨  How Do We Value IP Assets? ¨  Key Takeaways
  4. 4. 4Foresight Valuation Group © 2015 Why is IP Valuation So Challenging? ¤  Internally-grown IP Assets are NOT valued annually nor reported on the financial statements of companies n  Companies only required to report IP Assets acquired through M&A or through IP asset acquisitions ¤  Most IP transactions (licensing, sales) are highly confidential n  Lack of transparency into basic deal terms like: royalty rates, key licensing terms, patent prices ¤  IP assets are unique, which makes it difficult to compare one deal to another, even if the data were available The IP “Valuation Gap”
  5. 5. 5Foresight Valuation Group © 2015 Method Description Advantages Disadvantages When Used Market Based on market transactions involving comparable intangibles Market driven, reflects market prices (supply and demand equilibrium) Comparable transactions are not always available Most desirable, but rarely used (lack of market data) Income Based on future economic utility generated by the intangible (royalties or incremental profits) Top-down approach, based on economic utility and on industry norms Input factors may be hard to estimate: Future projections, Royalty rates, Market penetration Most commonly used (based on studies by KPMG, Deloitte) Cost Based on estimation of the cost to replicate/reproduce the intangible Easy to calculate – based on known factors (time and materials, hourly rates, overhead) No measure of utility or market demand Not very common IP Valuation Methods: At a Glance
  6. 6. 6Foresight Valuation Group © 2014 When Are IP Assets Being Valued? IP Valuation Funding Buying/ Selling Licensing Pre- M&A Enforcement Litigation Damages Financial Reporting (Post M&A) Transfer Pricing Bankruptcy
  7. 7. 7Foresight Valuation Group © 2015 Reporting (Compliance) Situations: IP Valuation is Mandatory IP Assets Financial/Tax Reporting Financial Reporting: -  IP acquired in M&A Tax Planning: -  IP holding companies -  Transfer pricing Litigation Damages
  8. 8. 8Foresight Valuation Group © 2014 Patents Patents +Know How Technology/ product IP Holder IP Type Transaction Type Purpose Sale License Enforcement External Reporting LicensingSpin Off Operating Company University NPE IP Valuation is Highly Contextual What is the IP Valuation Context?
  9. 9. 9Foresight Valuation Group © 2014 Valuation Purpose IP Assets Assessment = Evaluation Valuation Scenario & Analysis How We Value IP Assets? •  Technology •  Legal •  Business (Industry & market)
  10. 10. 10Foresight Valuation Group © 2015 Case Study: Patent Acquisition in Litigation ¨  Litigation scenario: ¤  Company A: a large LED market leader in the US ¤  Company B: a Chinese mfg entering the US market with cheap LED light bulbs, no patents ¤  Company C: a mid-size LED component maker with very valuable IP assets, selling to entire market (incl. A and B) ¨  Company A suing company B over patent infringement (plus unfair competition) ¨  Company B approaches company C to acquire a patent for counter suing company A ** What’s the value of the patent? **
  11. 11. 11Foresight Valuation Group © 2014 Patent Acquisition Case Study Company A: Large LED Player Company B: Chinese LED Manufacturer Company C: LED Patent Holder Patent Lawsuit Counter- Suit
  12. 12. 12Foresight Valuation Group © 2015 Range of Patent Value Scenarios ¨  Value to Company C (Seller): ¤  Development cost (design around) ¤  Opportunity cost (Comp. A is a client) ¨  Value to Company B (Buyer): ¤  Litigation Avoidance: delta in probability (with/without the patent) applied to litigation & damages cost ¨  Other strategic options: ¤  Sell to Company A ¤  Sell to another competitor ¤  Start an enforcement campaign
  13. 13. 13Foresight Valuation Group © 2015 Key Takeaways ¨  There’s an IP Valuation Gap: ¤  Most IP Assets are not valued on a regular basis ¤  There is lack of transparency into transaction data ¨  IP Valuation is highly contextual, depending on: ¤  The Holder ¤  The IP Type ¤  The Transaction ¤  The Purpose
  14. 14. THANK YOU! Efrat Kasznik President, Foresight Valuation Group ekasznik@foresightvaluation.com www.linkedin.com/in/ekasznik 650-561-3374 www.foresightvaluation.com Presentation available upon request

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