patent value - patent are assets, so learn how to value them

1. PATENT VALUATION
ANDY
DEPT. TECHNOLOGY MANAGEMENT INSTITUTE ZHONGHXING UNIVERSITY
-Patents Are Assets, So Learn
How To Value Them-

2. CONTENT
DEFINITION
WHY IT IS IMPORTANT
OBJECTIVES
METHOD
• COST-BASED METHOD
• MARKET-BASED METHOD
• INCOME-BASED METHOD
• DCF (DISCOUNT CASHFLOW)
• DTA(DECISION TREE ANALYSIS)
• OPT(OPTION PRICING THEORY)
ADVANTAGE AND DISADVANTAGE OF
• COST-BASED METHOD
• MARKET-BASED METHOD
• INCOME-BASED METHOD
STEPS TO BE TAKEN IN VALUATION PROCESS
RANKING OF THE BRAND VALUE
EXAMPLES
CONCLUSION

3. PATENT VALUE
For an enterprise engaged in
technological competition, its
relates to observable as well
as counterfactual information on
prices, costs, and quantities sold of
patent-protected products.
Harhoff et al.
(1999).
Is a expedience or worthiness of a product or service that has been in patent
depend on the sacrifice for development and/or the capability of the product to
gain revenue.

4. WHY PATERN
VALUATION
IMPORTANT
assists in the strategic
decisions to be taken on
the company's assets
Maximize company’s
value
facilitates the
commercialization and
transactions concerning
intellectual property
rights.
Support in situations of
patent conflict or
dispute.
Fund raising through
bank loans or venture
capital.
For accounting and
taxation purposes.

5. OBJECTIVES
• Raising Finance
• Valuing IP for use as security for debt
•Accounting
• External Transactions
Licensing / Purchase / Sale / Joint
Ventures
• Internal Management
First Filing, Foreign Filing,
Examination, Renewal, Investment
•Management

6. PATENT VALUATION
METHOD
• QUANTITATIVE VALUATION
• COST-BASED METHOD
• MARKET-BASED METHOD
• INCONE-BASED METHOD
• OPTION-BASED METHOD
• QUALITATIVE VALUATION

8. DCF(Discount
cashflow) -
Accounting for
Time &
Uncertainty
Calculating future cashflow
after discounted
Used two key factors to
calculate, there are the time
value of money and to some
extent the riskiness of the
forecast cashflows
These two problems can be
solved in two ways
using a risk adjusted discount
rate to discount the forecast
cashflows
using certainty equivalent
cashflows, in which forecast
cashflows are adjusted to
account for their riskiness and
changing riskiness over time

9. DTA (deciscion
Tree Analysis)-
Accounting for
Flexibility
Flexibility to : Abandon, Continue, Expand etc.
Give an option to expand the patent family by making
corresponding foreign applications.
Calculating the possible cashflows which might occur
there is a third problem with simple DCF methods
it build the value of flexibility along with a project, This
gives ability to allow at least some account to be taken
to abandon the patent event though it does not solve
the discount rate problem

10. OPT (Option
Pricing Theory)
- Accounting
for Changing
Risk
A right but not an obligation,
related to the investment
at or before some specified time
(the expiry date)
to purchase (a call option) or sell (a put
option)
at a prespecified price (the exercise price)

11. COST-BASED
METHOD
ADVANTAGES
• visible in the company’s accounting books
• Historic cost data is reliable
• If a recent acquisition cost of patent exists it
is a reliable indicator of value
DISADVANTAGES
• there is no direct correlation between cost of
development and the future potential assets
• Difficult to provide accurate information
between which expenses cost is include or
exclude
• No future benefits.

12. MARKET-
BASED
METHOD
ADVANTAGES
• Uses real, public data
• Does not rely on subjective forecasts
• Simple calculation
DISADVANTAGES
• Difficult to make direct comparison.
• Lack number of comparable
companies or transactions
• Risk of comparing with other IP
might be undervalued the IP

13. INCOME-
BASED
METHOD
ADVANTAGES
• focused on future earnings or cash flow
• relatively simple to assess the value on the
basis of the conditions set up
• Widely accepted and concepts widely
understood
DISADVANTAGES
• Requires subjective cash flow allocation
• uncertain cash flows and the discount rate
have to be estimated.
• difficult to implement in high-uncertainty
environments

14. STEPS TO BE
TAKEN IN
VALUATION
PROCESS
• Check Is the patent is in
force
1
• Identify the context2
• Gather information3
• Assemble valuation team4
• Read patent5

15. STEPS TO BE
TAKEN IN
VALUATION
PROCESS
(cont’d)
• Investigate the patent scope6
• Talk with a patent advocate7
• Inquire about the patent’s
validity
8
• Inquire into blocking patents9
• Consider synergies among
patents
10

16. STEPS TO BE
TAKEN IN
VALUATION
PROCESS
(cont’d)
• Investigate foreign patent protection11
• Consider the remaining life of the
patent
12
• Analyze any prior royalties paid for
the patent
13
• Inquire into any actual or threatened
litigation involving the patent
14
• Identify the next-best alternative
technologies
15

17. STEPS TO BE
TAKEN IN
VALUATION
PROCESS
(cont’d)
• Estimate a demand curve for the
patented item
16
• Determine the patented product’s
point of profit maximization
17
• Consider the applicability of
traditional valuation approaches
18
• Do an income-approach valuation19
• write the patent valuation report20

18. WORLD’S MOST VALUEABLE BRAND

19. EXAMPLESEXAMPLE1
1
EXAMPLE2
2
https://www.slideshare.net/
AlpsVP/intellectual-
property-sample-report
3

20. CONCLUSION
As intellectual property grows in its
importance, managers must understand not
only the methods of valuing these assets, but
also the unique risk factors associated with
intellectual assets. Each valuation technique
outlined has its strengths and weaknesses, but
as is true with enterprise valuation there is no
definitive right or wrong valuation approach.
However, it is wise to use several of these
methods when valuing a specific IP asset. This
provides differing viewpoints on the underlying
asset value and is a useful check for
consistency in assumptions and human errors
that may occur in relying on only one method.