Intellectual Property (IP) Valuation

We all know that Intellectual Property (IP) valuation plays a key role in determining the solvency, merger or acquisition of a company. IP valuation is certainly considered as one of the most critical areas in finance. As an economist, I was always intrigued by it.



There are numerous reasons or motivations for conducting an intellectual property valuation or economic appraisal analysis. A valuation is prepared, for example, for transactions, pricing and strategic purposes, financing securitization and collateralization, tax planning and compliance, and litigation support.


I recently received an inquiry regarding a trademark valuation that inspired me to write this article for our newsletter. It was from a family business that decided after many years in business to change industries.


Brand Finance, an independent business valuation consultancy (www.brandfinance.com) estimates that 72% of corporations’ value in the United States of America is explained by the value of its intangible assets.


In order to complete the valuation of a given company, it is important to determine:


  1. When is a good time to valuate a trademark?

  2. What is a good reason to do it?

  3. What is the meaning of economic value?

  4. Which one is the right method to valuate?


Most of us understand that a trademark is a sign capable of distinguishing the source of specific goods or services from others. At the national and/or regional level, trademark protection can be obtained through registration obtaining the exclusive use and property in the economic market.


A trademark can be valuated at any given time and for a variety of reasons, strategies, financial reports, acquisitions, litigations and mergers, etc.


The economic value of a trademark is the extra money that a consumer pays for the products under one particular trademark comparing to another similar one because it gives consumers more peace of mind and confidence. Valuating a trademark has objective and subjective components, the evaluation occurs in a market and within a context. Concerning the correct method or approach, there are many. All of them require an investment and market knowledge. Depending on the circumstances, we can use one and/or the other to obtain an accurate valuation.


The valuation analysts use numerous approaches in order to reach a reasonable indication of a defined value for the subject intangible assets on a certain date which is referred to as the valuation date. The methods or approaches are:


  1. INCOME APPROACH BRAND VALUATION: It considers the valuation of future net earnings that can be attributed directly to the brand to determine the value of the brand in its current use.

  2. COST BASED BRAND VALUATION: It is based on the accumulation of the costs that have been incurred to build the brand since inception.

  3. MARKET-BASED BRAND VALUATION: This method uses one or more valuation methods by comparing similar brands which have been sold.

  4. ROYALTIES BASED VALUATION: Contemplates an estimation of the royalties’ value that a person has to pay for using a trademark if he/ she is not the owner and wants to use it.


Feel free to contact me for more information. You can send me an email at luciana@noli-ipsolutions.com

5030 Bella Collina St.,
Oceanside, CA 92056

442-224-7490

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