IPR IP Audit Valuation (1)

8/10/2019 IPR IP Audit Valuation (1)

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IP ASSETVALUATION AND IP

AUDIT


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IP ASSET VALUATION2


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ASSETS

An economic resource.

Anything tangible or intangible that is capable of

being owned or controlled to produce value and

that is held to have positive economic value is

considered an asset.

An item of economic value owned by an

enterprise that could be converted into cash

An asset is a resource controlled by the

enterprise as a result of past events and from

which future economic benefits are expected to

flow to the enterprise3


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TWO KINDS OFASSETS

Tangible

Building

Machinery

Intangible

Goodwill

Intellectual Property

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IP ASSETS

Intangible assetknowledge based

Legal Right to exclude others from using

Limited duration

Assignable/ Licensable/Transferable Can be bought, sold, licensed, or given away free

Multi-usable

Use does not exhaust

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FACTORS DRIVING THE INTELLECTUAL

PROPERTY

Intellectual property derives its value from a

wide range of significant parameters such as

Market share

Barriers to entry

Legal Protection

IPs profitability

Industrial and economic factors

Growth projections

New Technologies

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RISKS IN IP ASSETS

New Patents

Revocation of Patents

Infringement Suits

Trade Secrets Weak Enforcement Regimes

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VALUATION

Valuation is a process of determining value or worthof an asset and the legal concept of property

Value of a thing in particular place, at a particulartime, in particular circumstances.

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IP VALUATION

IP valuation depends on various factors

Use of the IP assets

Market share of company

Legal protection of IP

Enforcement cost

Economic growth

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USE OF IP VALUATION/ SCENARIOS

WHERE IP VALUATION IS REQUIRED

For commercial transactions

For pricing product

For evaluating potential merger or acquisition candidates

For identifying and prioritizing assets that drive value

For strengthening positions in technology transfer

negotiations For making informed financial decisions on IP

maintenance, commercialization and donation

For evaluating the commercial prospects for early stageResearch & Development (R&D)

For evaluating R&D efforts and prioritizing researchprojects

For Financing through VC

For litigation and dispute resolution

For tax planning 10


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BENEFITS OF IP VALUATION

Can give a better idea of the overall value of the

business

Can provide a tool to measure and manage the

assets

Can provide security and backing for lenders

Can provide taxation benefits (taxation

deductions)

Business net worth attributed to goodwill important when selling a business

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FACTORS CONSIDERED IN PATENT

VALUATION

Qualitative and quantitative characteristics of thepatent(s), including the specific patent claim

Earnings capacity and profitability relating to thepatent(s)

Any current or previous licensing of the patent Legal rights and restrictions to the patent(s),

including foreign patent protection

Contracts associated with the patent(s)

Competition, barriers to entry and risks associated

with the patent(s) Product life cycles and positioning

Historical growth and prospects for the future

Alternative uses for the patent(s) 12


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FACTORS CONSIDERED IN TRADE MARK

VALUATION

Qualitative and quantitative characteristics of thetrademark(s)

Earnings capacity and profitability relating to thetrademark(s)

Market share supported by, or as a result of the

trademark(s) Market recognition analysis of the trademark(s)

Legal rights and restrictions to the trademark(s)

Contracts associated with the trademark(s)

Competition, barriers to entry and risks associated withthe trademark(s)

Product life cycles and positioning


Exploitation opportunities of the trademark(s) into newmarkets/products

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FACTORS CONSIDERED IN BRAND

VALUATION

Qualitative and quantitative characteristics of the brandname(s)

Earnings capacity and profitability relating to the brandname(s)

Market share supported by, or as a result of the brand

name(s) Market recognition analysis of the brand name(s)

Legal rights and restrictions to the brand name(s)

Contracts associated with the brand name(s)

Competition, barriers to entry and risks associated withthe brand name(s)

Product life cycles and positioning


Exploitation opportunities of the brand name(s) into newmarkets/products

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VALUATION METHODOLOGIES

Cost based approach

Based on principle of substitution-- estimated on

the basis of cost to construct a similar assets

Based on economic factorssupply and demand

Income approach

Future cash flows (Both amount and timing)

Economic life

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IPAUDIT16


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IP AUDIT: WHAT IS IT?

A systematic review of the IP assets owned, used

or acquired by a business

IP Audit says

How the IP assets are being used or not used

Whether the IP assets used by it are owned by the

company or others

Whether these IP assets are infringing the rights of

others or others are infringing on those rights, and

determine, in the light of all this information What actions are required to be taken w.r.t. each IP

asset, or portfolio of such assets to serve the relevant

business goals of the company17


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IP AUDIT: WHAT IS IT?

Its purpose is to uncover under-utilized assets,

to identify any threats to a company's bottom

line, and to enable business strategists to devise

informed strategies that will maintain and

improve the company's market share and brand

equity.

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IP AUDIT: OBJECTIVE

To uncover under-utilized IP assets

To identify any threats to a companys bottom line

To enable business planners to devise informed

strategies that will maintain and improve the

companys market position

Overall purpose of an IP audit is to identify

and assess all of the companys intangible

assets in order to conduct a SWOT (Strengths,

Weaknesses, Opportunities, and Threats) analysis todetermine the valuable core assets and optimize

their usage through a systematic long-term

strategy19


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IP AUDIT: OBJECTIVE

As your business grows it is essential that you

identify and keep an inventory of your

intellectual property (IP) assets.

This is called an IP audit and it will help when it

comes to seeking protection for your intellectual

property.

Understanding your IP assets is a vital part of

business planning.

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IDENTIFYING YOUR IPASSETS

The first steps in an IP audit are:

Identify the products or services that are key to

your business Identify your IP assets and the legal rights that

constitute them in relation to your goods or

services

Understand what market advantage these rightsgive you (i.e. cost, performance, timeliness).

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STEPS ION IP AUDIT 1

First Step: Investigation

All things created, developed or used by the

organisation such as, inventions, formulas,

processes, devices or other technologies, creative

works, such as music, books or computer videogames, business information, including

advertising, promotional materials, customer

lists, prospect lists, pricing information, sales

figures, financial projections and other materials

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STEPS IN IP AUDIT 2

Second Step: Identification

Identify the readily identifiable IP

Trademarks

Copyrights

Designs

Patents

Product/process Know-how

Trade Secrets

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STEPS IN IP AUDIT- 3

Third Step: Categorisation

Owner

Licensee

Licensor

Domestic

Foreign

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STEPS IN IP AUDIT 4

Fourth Step: Itemize external or market

influences

company brand

product brands

Goodwill

product certification

export certifications

Regulatory approvals

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STEPS IN IP AUDIT - 5

Fifth Step: Examine Enforceability

Legal Provisions and Economics

Administrative Action

Legal Steps Civil Procedures

Criminal Procedures

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AN INVENTORY OF IP AUDIT

Whether or not your IP rights are registered;

Whether you have any intellectual propertyissues and what to do to address them;

Who owns the rights and, if you not, identify any

conditions that apply to their use;An assessment of whether your IP is being used

effectively;

Whether your rights are being challenged or

threatened by others; Whether you have an effective IP management

and maintenance plan in place; and

Records of your IP creation and ownership. 27


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WHEN TO DO AN IP AUDIT?

General Purpose Audit:

Can be conducted any time without any specific

purpose

Before establishing a new company

At a time of implementing new policies, standardsand procedures

When business is considering implementing a new

market approach or major reorganisation

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PRINCIPAL REASONS FOR CONDUCTING AN

IP AUDIT

To identify opportunities to license or sell IP

To protect against theft or trade secrets

The increasing recognition of the value of IP as

business assets

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IPR IP Audit Valuation (1)

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