Intangibles & Intellectual Property
    

Patent Valuation

Research and development can be one of a company's most significant and important investments. It sparks innovation, drives technological advancement, energizes product development and promotes efficiency improvements. Because of this, companies seek legal protection of the resulting ideas and processes in the form of patents. A patent grants the assignee exclusive right to the invention for a specified period of time. Like other intangible assets, it is sometimes necessary to obtain patent valuations. AccuVal's business valuation team examines the value of intangible assets every day and understands the key factors that impact the value of a patent.

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Patent valuations are needed for a variety of matters including to support transfer of ownership (licensing or assignment) of the business or patent, collateralized financing, financial reporting and taxation matters. A valuation of patents may also be needed to support litigation matters, such as quantifying patent infringement damages.

To select the appropriate methodology, AccuVal first seeks to understand the use of patent valuations. This context is important because the approaches to value can result in very different value conclusions. It is also important to determine whether the patent is being appraised individually or as a family. If conducting the valuation of patents as a family, the appraiser will need to understand how each patent interrelates with one another and whether discernable income streams can be associated with individual patents or only to the group as a whole.

Our team of certified appraisers will also gather information to better understand the scope of the patent valuation. We examine the patent's claim and whether any blocking patents exist that could potentially claim infringement. We learn about the history of the patent and how it is currently being used and whether it has any applications beyond its current use. We will want to understand any current or previous licensing of the technology and the royalty rates paid. We consider what, if any, foreign patent protection exists and where the patent is in its lifecycle — legally, technologically and regulatory. Lawsuits can be a good indicator of the strength of a patent; in such, the outcomes of any historical litigation are an important consideration. We will also request historical income streams associated with the patent and any financial projections. The value of a patent is derived only after these and other numerous considerations.

Due to their unique nature, patent valuations are less often derived from the cost or market approaches to value. However, when appropriate, AccuVal has access to a significant database of comparable patent transactions (sale and licensing) to support the conclusions of value. The most common approach to valuation of patents is the income approach. In this approach, an appraiser identifies the profit attributed to a patent by calculating the premium pricing associated with the sale or the patented products and/or the money savings associated with the use of the patent. Alternatively, an appraiser may examine the projected income stream derived from the royalties earned under licensing. Or the appraiser may calculate the net present value of the income stream with the patented technology and without, and then compare the two as another means of valuation.

With so many nuances, patent valuation is a highly skilled discipline. It necessitates a 360º understanding of how patents interact with the marketplace and how they operate within an organization. AccuVal's team of appraisers are experienced across more than 100 industry segments and are knowledgeable of all business assets, including machinery and inventory, equipping us with a comprehensive understanding of business processes and the key role that patents play.

 

Learn About AccuVal Appraisals
What is included in the appraisal?
  • Well-supported and defensible independent opinion of value
  • Narrative of the history and nature of the patent(s)
  • Statement describing and explaining the purpose, scope, value definition and asset definition of the appraisal
  • Detailed industry and economic overviews relating to the products/services that the patent(s) cover
  • Detailed qualitative and quantitative analysis of the patent(s), including (when possible):
    • Income approach to value
    • Market approach to value
    • Cost approach to value
  • Overview of methodology, assumptions and limiting conditions
  • Detailed exhibits that support computations and analysis
What factors are considered when determining value?
  • Qualitative and quantitative characteristics of the patent(s), including the specific patent claim
  • Earnings capacity and profitability relating to the patent(s)
  • The impact of known blocking patents
  • 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)
How do I get started?

The following is needed to determine how AccuVal can help:

  • Background information on the patent(s) to be valued
  • Financial information relating to the patent(s) by product/service line (if available)
  • Description of the company and its operating divisions
  • Brief description of the products and services produced by the company
  • Copies of past appraisals
  • Value definition(s) required

For more information or to request a proposal:

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