Factors to Consider When Valuing Intellectual Property

Valuation Methodologies:

Market Approach

• Sales transactions

• License transactions

• Relief from Royalty

Relief From Royalties Approach

• Consideration of the 15 Georgia Pacific Factors

Income Approach

• Gross or net revenues

• Gross profit

• Net operating income

• Pretax income

• Net income

• Operating cash flow

• Net cash flow

• Gross royalty or license income

• Incremental income

• Cost savings

Cost Approach

• Substitution

• Supply and demand

• Externalities

• Functional Obsolescence

• Technological Obsolescence

• Economic Obsolescence

Unidentifiable Intellectual Property

• Market share

• High profitability

• Lack of regulation

• Regulate or protected position

• Monopoly position

• Market potential

• Liquidity

• Competitive edge

• Life-cycle status

• Uniqueness

• Discount prices

Intellectual Property Attributes

• Legal ownership

• Specific identification and description

• Measurable economic benefit

• Destroyable

• Finite life span