This document discusses IP management and valuation in the IT industry. It explains that knowledge is the most valuable strategic resource for IT companies. IP valuation is important for various strategic reasons such as developing an IP strategy, identifying revenue opportunities, and accurately reflecting company value. The three main approaches to IP valuation are the cost approach, market approach, and income approach, each with their own advantages and disadvantages. Choosing the best approach depends on the valuation purpose and available information, but using multiple approaches is generally advisable for validation. The document concludes that IP awareness is important for software companies but remains low among Indian firms.

1. IP Management and IT
Industry
Anirudh Narain Bhatt
LLM Ist Yr., NLSIU, Bangalore
Dr. Mithilesh Narayan Bhatt
Post Doctoral Fellow, ICSSR, New Delhi
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2. In any economy where the
only certainty is uncertainty,
the one sure source of lasting
competitive advantage is
knowledge
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3. Why IP Management in IT
Sector?
 Most valuable strategic resources
 knowledge is whole and sole of
information technology
 Yahoo – the market value of the
company was in December 1998
5400% higher than the company’s
actual equity capital stated in the
balance sheet
 Similar in cisco and buyer case.
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4. IP Valuation
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5. Why IP Valuation?
 Choose between market opportunities;
 More effectively protect and leverage the IP
portfolio and important technology Necessary to
capture innovation and future growth;
 Develop a strategy for IP development and
protection that is closely aligned with the company’s
overall strategic goals;
 Identify un-tapped value and revenue opportunities;
 Compare and select projects for the best allocation
of the development budget;
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6. Why IP Valuation?
 Better utilise the IP portfolio through various
commercialisation avenues such as licensing,
donation, joint ventures, divestiture, transfer to
suppliers, set-up of subsidiaries, spin-offs, etc.
 Justify a return on investment for technology and
patents;
 Reflect overall company value more accurately on
financial statements
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7. IP Valuation : How?
 The cost approach
 The market approach and
 The income approach
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8. Advantages Disadvantages
 No one willing to pay  No correlation between
more to use the property expenditure on an asset
than the cost to replace and its value.
the property  Difficult to distinguish
 Reliability of historic cost between ‘normal’
data operating expenses and
 If a recent acquisition patent investment
cost expenditure
of patent exists it is a
reliable indicator of value
Cost Approach
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9. Advantages Disadvantages
 Practical approach which  No other similar product.
makes use of prices  Transactions involving
actually paid for the
comparable assets shares of companies
 helpful in determining owning patents are more
running royalty rates in frequent but allocating
specific licensing value between the
transactions. business and the patent
is
difficult
Market Approach
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10. Advantages Disadvantages
 focused on future  Translation of theory into
earnings practice requires
or cash flow assumptions which are
 expected economic life limiting.
of the asset  Relevant information is
 Expected future not
cash flows from the always readily
asset accessible
 Risk associated with
realizing those future
cash flows
Income Approach
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11. Which Method is Best
Suitable
Choosing an appropriate method is based
on the purpose of the said valuation and
the relevant information available, But it is
generally advisable to compare the result
obtained by two methods for the purpose
of challenging the results
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12. “IP awareness is very important
for software services companies
but the level of IP awareness
among software companies in
India is very low”
Mr. Chaitanya singh
IP Management and IT Industry 12

13. Thank You
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