The document discusses recent trends in intellectual property (IP) asset valuation seen over the past year: 1) Foreign assets, particularly from Germany, Korea, China, and Japan, are playing an increasingly significant role in IP portfolios and driving more value as these foreign markets grow in economic activity and enforcement. 2) "Carrot licensing", which focuses on technology transfer rather than enforcement, is making a return as patents are less valuable as "naked assets" and trade secrets gain prominence. 3) Biotechnology sees valuable IP assets, especially patents, playing a key role in M&A deals and collaborations as innovation increases in areas like molecular diagnostics. 4) New digital asset categories like databases, cryptoc

1. Licensing
V O L U M E 3 9 N U M B E R 3
Edited by Gregory J. Battersby and Charles W. Grimes
THE
Journal
MARCH 2019
DEVOTED TO
LEADERS IN THE
INTELLECTUAL
PROPERTY AND
ENTERTAINMENT
COMMUNITY

2. MARCH 2019 T h e L i c e n s i n g J o u r n a l 1
Carrots and Coins: Recent Trends in the
Valuation of IP Assets
Efrat Kasznik
Efrat Kasznik is president of Foresight Valuation
Group, a Silicon-valley based consulting firm
specializing in IP valuation and strategy advisory.
Ms. Kasznik is a Lecturer on IP Management at
the Stanford Graduate School of Business. She
serves as Chair of the Licensing Executives Society
(LES) USA-Canada’s High-Tech Sector and has
been listed on the IAM Strategy 300—The World’s
Leading IP Strategists list every year since 2013.
A lot has been written on the impact of the new
leadership at the USPTO on the value of patents.
Since his appointment in early 2018, Director Andrei
Iancu has managed to introduce new initiatives that
increase transparency and uniformity in how the
USPTO and the courts interpret patent claims and
validity challenges, reforms that are largely consid-
ered to have a positive impact on the value of patents.
Some market followers who keep track of the vener-
able “pendulum”, which signals the patent climate
de-jour, were quick to note that the pendulum started
swinging ever so slightly back in favor of patent hold-
ers (as indicated by some renewed interest in the pat-
ent marketplace).
From an IP valuation perspective, one should take
a broader view at the factors impacting the value of IP
assets: patents, as well as other assets. While patents
represent legal rights that are profoundly impacted
by case law and the USPTO examination policy,
focusing on legislative and judicial developments in
the US alone constitutes a very narrow lens by which
to evaluate IP portfolios and the value they bring to
the companies that hold them. Our experience
over the past year indicates that patents are only one
component of the modern company’s IP portfolio.
There are other types of intangible assets, including
new categories of assets we haven’t seen before, that
are emerging in the new digital economy, posing
new valuation challenges but adding more sources of
value for companies. Additionally, new technological
advances are creating fertile ground for technology
transfer and open innovation, processes that depend
on IP rights and which give IP assets great value.
Below are some of the main trends in that we have
seen over the past year, based on the IP portfolios and
transactions that came through the door in our IP
valuation practice:
Foreign Assets Increasingly
Significant
Over the last year, we have seen a clear increase in
the weight of foreign assets in the IP portfolios pre-
sented to us; it used to be the case that the vast major-
ity of assets were US assets, with a few counterparts
that served more as a placeholder and less as a driver
of economic value. Over the last couple of years, we
have seen more and more patent portfolios used to
support funding, strategic collaborations, interna-
tional expansion or the sale of a company, where the
major corpus of assets were foreign assets. More spe-
cifically, we have seen German, Korean, Chinese, and
Japanese assets anchoring an entire portfolio with
very little and sometime no US counterparts at all.
This is a telling sign of the increasing state of enforce-
ment in foreign markets, as well as the increasing
economic activity in foreign markets, which are usu-
ally the two reasons driving patenting decisions. I will
stop short of also saying that this is a sign of the weak-
ness of the US patent market, because I don’t believe
that to be the case. Patenting decisions are made
years in advance of the patent actually showing up. I
also don’t believe that to be a ‘zero sum game’, i.e., if
foreign IP assets drive more value, it doesn’t mean the
US assets are worth less, but rather the entire pie is
probably worth more.
Return of “Carrot Licensing”
Another trend that we are seeing emerge is the
return of “carrot licensing”, which is a term used
to reference licensing activity that is driven by tech-
nology transfer, as opposed to licensing driven by
enforcement (also known as “stick” licensing). This
form of licensing is more closely associated with
emerging technologies, where the licensor is inter-
ested in creating markets for new products using an
idea protected either by trade secrets or by patents.

3. 2 T h e L i c e n s i n g J o u r n a l MARCH 2019
With enforcement models taking a back seat for a
variety of legal and judicial reasons, particularly
in the United States, we are seeing more and more
licensing activities involving new technologies and
the IP rights protecting them. While enforcement
is looking into infringement in mature markets,
technology transfer is looking to carve new markets.
This is a clear indication not only of the decline in
the value of patents as “naked assets”, but it also
indicated the increase of trade secrets as a form of IP
protection that can be monetized together or apart
from patents. We worked with a few European com-
panies looking to expand worldwide using technology
licensing as their main business model, seeing that
a licensing business model allows expansion into
new regions without bearing the marketing, manu-
facturing, and distribution cost associated with the
complementary business assets needed to bring new
technology to market.
Biotechnology
There is a wave of innovation in the area of bio-
technology, leveraging on novel methods for molecu-
lar diagnostics and other technologies enabled by
advances in genetic sequencing and gene editing, as
well as the convergence of science with big data ana-
lytics and artificial intelligence (AI). Many of these
technologies are initially developed by startup com-
panies, who end up licensing to, or being acquired by,
larger players. In such acquisitions or collaborations,
we have seen IP rights—patents in particular—play
a key role in determining the price and terms of the
deal. IP assets in these areas are very valuable, and
they gain their value from a technology transfer and
new market perspective. As a matter of fact, IP assets
in biotech and other life sciences companies are so
valuable that they often survive the company even if
the startup goes bankrupt for lack of funding, particu-
larly if regulatory (FDA) approvals have been secured
and other product milestones have been met.
Digital Assets
Over the last couple of years, we have seen the
emergence of new digital assets: databases, crypto-
currency, and other types of assets that made their
way from the digital world into the business world.
The valuation profession is slow to keep up with these
assets, and as a result we have to be very creative in
how we value them, as no guidelines, comparable
transactions or other points of reference exist. One
interesting case we have worked on this year involves
the valuation of a digital token for a token-presale (a
token is an asset used in a Blockchain environment to
facilitate transactions on the network). From a valu-
ation perspective, valuing tokens and cryptocurrency
in general poses a challenge, as the very nature of the
asset is not clearly defined: is it a security, a commod-
ity, or a currency? Should the asset, and therefore the
valuation thereof, be regulated by the SEC? Many of
these valuations are done for tax reporting purposes,
however, there is no clear policy by the IRS on some
of these assets and the regulations are evolving, which
makes the valuation exercise somewhat of a moving
target.
In conclusion, corporate IP holders should take
a much broader look at their IP portfolio and their
monetization opportunities, not one that is narrowly
focused on the trials and tribulations of the US patent
market. With technology transfer on the rise, foreign
IP markets opening up, and new types of assets show-
ing on the portfolio, things are looking up for IP hold-
ers as we approach 2020.
Copyright © 2019 CCH Incorporated. All Rights Reserved.
Reprinted from The Licensing Journal, March 2019, Volume 39, Number 2,
pages 5–6, with permission from Wolters Kluwer, New York, NY,
1-800-638-8437, www.WoltersKluwerLR.com