1. IP Value and Structuring Implications of
Emerging Digital Business Models
3rd June 2014
Jim Asher
Head of Valuation
Coller IP
© Coller IP 2014

2. Outline
• Valuation of IP for different digital business models
• The challenges of providing a solid basis for IP valuation
• Using market evidence for the value of IP transactions
• Centralisation trend: implications of centralised sales,
service, customer support, finance and other business
functions
© Coller IP 2014

3. Intangible Assets
© Coller IP 2014
Intellectual
Intellectual
Capital
Capital
Intellectual
Assets
Un - recorded inventions
Key skills
Know - how
Processes
Market data
Information
Intellectual
Property
Patents
Trade Marks
Designs
Copyright
Databases
Trade secrets
Business relationships
Branding
Reputation
Contracts
Legal
underpinning
People-based
assets
Routes to
market
© Coller IP Management 2007

4. Digital IP Challenges
• Digital economy: software, (ephemeral) content,
databases, novel business concepts, and virality
• Validity of patents is different in USA and Europe
– Software: OK in USA, difficult in Europe
– Business methods: OK in USA, not valid in Europe
• Copyright is a challenge to enforce
– Access controls and technical fixes
• Digital world sits in cyberspace
• Time is often critical
• New challenges – e.g. securing identity, 3D printing
© Coller IP 2014

5. What is the value of IP?
• IP provides exclusive rights
– Maintain a premium price
– Support a market share
• Value is in the additional profits IP can protect
• Without a market, IP may be a liability
© Coller IP 2014

6. Valuation essentials
• An economic context
– A clear business model
– Reliable financial and market information
– Contribution of IP to the economics
• Credible assumptions
• Benchmarks to market comparators
• An appropriate methodology
• Understanding the purpose €£$?
© Coller IP 2014

7. Who wants to know?
• Businesses
• Lawyers & Accountants
• Investors
• Lenders
• Insolvency Practitioners
• Tax authorities and advisors
– Taxable events
– Transfer pricing
© Coller IP 2014

8. Valuation methods
• Cost-based
– What would it cost to replace the future
capability of an asset?
• Market-based
– Are there similar transactions in the market to
provide comparators?
• Future income
– What additional profits/cash will the IP
generate in the future?
© Coller IP 2014

9. Key factors in a valuation
• Financial model
• Identification of risks and discounts
– Technical risk: will it work?
– Market risk: demand, who/how many will buy?
– Legal risk: legal challenges, loss of IP rights
• Time value of money
– DCF calculations
– WACC benchmarking and risk adjustment
• Uncertainties in key parameters > value range
• Robust inputs and justifiable assumptions, not just maths
© Coller IP 2014

10. Example
• A business with a free-access specialist factual website
– High visitor score
– Significant revenues from advertising
– Projecting to expand with other language versions
• IP is in the website and the ‘brand’
• What is its value?
– How durable is the revenue?
– What are the risks?
• Where is the revenue earned?
© Coller IP 2014
Case study

11. Structural trends
• Centralisation trend: centralised sales, service,
customer support, finance and other business functions
– Amazon s.a.r.l. takes the sale, Amazon UK fulfils the order
– Where does the IP make an impact?
• IP in a holding company (in a low-tax location) with
interco licensing
– Starbucks, Google, Microsoft
• Taxation drives requirements to value IP
– transfer
– transfer pricing
© Coller IP 2014

12. Transfer pricing and IP
OECD Guidelines
• Where is the value generated?
• Where is the profit made?
• Identify ‘routine’ profits in trading
• Identify profit attributable to the IP
• Accounting for IP-related costs
• Identify a fair profit split between
related parties
• Market comparators for
uncontrolled transactions
© Coller IP 2014

13. Digital economy: challenges
• In the digital economy, where does the taxable
transaction occur?
• How are costs allocated in a distributed business?
• Are financial projections reliable?
• Is the opportunity gone before IP is secure?
• Where does IP protection apply?
• Can IP laws keep pace with rapid change?
• New risks in new business models
© Coller IP 2014

14. Jim Asher
jim.asher@collerip.com
www.collerip.com
© Coller IP 2014
…making the intangible valuable