The valuation of Intellectual Property is the hardest of all asset valuations. It’s harder then valuing a company using DCF/WACC, and far harder than conducting a real estate appraisal. The value of a brand or other Intellectual Property is not the same to all possible owners. It is dividable in ways that companies and real estate are not. Intellectual Property – whether patent or trademark – might increase the sale price of a product, reduce manufacturing expenses, or create an entirely new class of product, such as the iPhone. Ultimately, valuation of Intellectual Property is a detail oriented and fact specific exercise requiring complex analysis.
Turning Intellectual Property into cash is not easy. Here are some hard truths:
Roughly 50% of patents that are litigated are held to be invalid
92% of all the requests to USPTO to reexamine patent claims are granted
78% of the reexaminations find a problem with the original claims
45-50% of patents have no strategic value>
Only 2-5% of patents generate any royalties
Buyers commonly acquire licenses for 1-10% of the anticipated cumulative licensing fees. This is due to the risk of the patent being ruled invalid or of receiving an injunction imposed on the product which incorporates the patent.
How do you bridge this gap? We have developed methodologies to raise capital via Intellectual Property Monetization, which is an essential part of Shareholder Value Maximization.