The following is an excerpt from the article entitled Patent Portfolio Valuations – Importance of IP and Patents in IP Watchdog. The featured article was authored by GHB Intellect’s Chief Strategy Officer and valuation expert, Dr. Masoud Vakili.
Topics included in this article are: Philosophy of an IP Market, Examples of Early Patent Transactions, Portfolio Valuation Methods, Cost-Based Valuation, Market-Based Valuation, Income-Based Valuation, Additional Factors in Valuation, Future Value Estimation, Valuation of Standard Essential Patents and the FRAND Issue, and Valuation Cross-Calibration.
Intellectual Property (IP) is a crucial portion of a company’s assets. Today, a great portion of the assets of fortune 500 companies consists of intangible assets including intellectual property.
A strong IP portfolio is instrumental for fundraising, leverage in business transactions, exit strategy (e.g. for startups), and business transactions such as mergers and acquisitions (M&A), to name a few.
Intellectual property may consist of patents, trademarks, copyright, and trades secrets. Patents are in many cases the most important portion, especially in the high tech and biotech industries. Since there are a large number of transactions in these areas, it is important to assess and estimate the value of a patent portfolio.
A strong patent portfolio provides confidence and relative freedom to operate (FTO) for mid-range and large companies. For smaller companies and startups eyeing an exit scenario, an FTO analysis based on their patent portfolio is usually a big factor in the total company valuation. It is for this reason that patent portfolio valuation has become a major discipline in high demand.
Even though patent sale transactions have been around for more than a century, in recent years, such transactions have become a market in their own right. Significant transactions have taken place worth up to billions of dollars per portfolio with direct or indirect bidding (through a proxy). Examples include the sale of the Nortel, Motorola Mobility, and some of Eastman Kodak portfolios.
To learn more, please watch Dr. Vakili’s IIPLA webinar on Patent Portfolio Valuation & download the slides. Please also follow this link to learn more about the industry-leading patent valuation services offered by GHB Intellect. We have been selected as an IAM Strategy 300 member for our expertise in this area. Please contact us for more specific information on your IP needs.