Brand Value can be estimated through the resources of a company, such as technology, copyright, trademarks, and other IP. Awareness of and the linkages between the value contribution of these tools is important for business strategy, IP management, and IP valuation. The main reason firms obtain intellectual property is not for litigation, but to have transferable and legal proof of ownership to their important intangible assets. A non-linear relationship between the cost of IP creation and its value is rarely found. It poses a high risk of wasted investment, but if commercialized, it can be counterbalanced by the high potential that IP assets hold. IP asset value is derived by direct exploitation such as the sale and licensing of the IP or even by not exploiting (i.e. merely owning) an IP asset, for example by minimizing customer bargaining power, offsetting supplier power, mitigating competition, raising barriers to entry by rivals, reducing the threat of substitutes, etc. Different factors influence IP Valuation. Firstly, there are different standards to evaluate the IP these are Fair Price Value and Fair Market Value. Fair value (fair price) is seen as suitable for use in the allocation of post transaction purchase price. This is based on the assumptions that would be used by market participants when pricing the asset. It is possible to define fair market value (market value) as the price at which an asset or service passes from a willing seller to a willing buyer. Both buyer and seller are presumed to be rational and to have a reasonable understanding of relevant facts. Whereas fair market value appears to be more appropriate when used in exchange for the presumption of value, fair value is often based on the presumption of in-use value. As previously mentioned, IP valuation is a method for assessing the fair market value of an IP asset under common circumstances. Then is the Purpose of Valuation, the purpose and goal of a project are directly related to the desired result so it is very important, therefore, to know the purpose for which an IP is being assessed. The clarity of the objective enables an evaluator to list all the relevant factors and various parameters that could play a crucial role in the process of value estimation. There also different methods of valuation. The market method is the most effective method while the cost method is another mode of valuation. Lastly, the nature and strength of the IP also act as a factor. The competitive strength of an IP asset is determined by the comparative valuation that it holds in the market. Its IP value is determined by factors such as customer responsiveness and market distribution of a product or service in use. The value of IP assets is affected by the threat of new entries and substitutes. For IP assets, the most appropriate method depends on the assumption of purpose to be derived from the result, the assets subject to valuation, and the particular section for which the valuation is prepared.
The two efficient means of valuation are:
It values the IP based on the amount of financial revenue expected to be generated by the IP. Project the revenue flow over the remaining useful life of the asset to evaluate and offset those revenues by the cost associated with the asset. By using the discount rate or capitalization rate, the risk needs to be discounted from the amount of income. The method is most suitable for IP value capture, which generates stable cash flows. The method does not, however, take into account the independent risks associated with an IP asset and lumps together all the risks to be adjusted at the discount rate.
This is the most commonly used approach, based on a comparison of the actual price paid under comparable circumstances for a similar IP asset. The calculation would be accurate if adequate information exists on the nature and scope of the rights transferred, the circumstances of the transaction, e.g. the license agreed in the settlement of litigation. The process initiates research into an appropriate market for obtaining transaction information on sales and licensing of the subject IP. The second step is to select the appropriate comparison units, such as "per drawing" and "per location" "per customer" and the development of comparative analysis for the units that take into account factors such as profitability, risk, industry, business structure, the strength of IP rights, etc. The second step is to select the appropriate comparison units, such as "per drawing" and "per location" "per customer" and the development of comparative analysis for the units that take into account factors such as profitability, risk, industry, business structure, the strength of IP rights, etc.
The importance that it deserves has never been received by IP Valuation. One of the factors influencing the success or failure of a company is the degree to which it exploits and values its IP assets. The outcome of the financial generation of IP assets is not just a short-term strategy. Through higher investment, lower probability of bankruptcy, and better chances of a successful exit through initial public offerings, companies with strong IP assets have increased their likelihood of success.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.
