The valuation of intellectual property (IP) is a procedure for determining the value of intangible business products (patents, copyrights, trademarks, industrial designs, etc.). It allows you to reasonably carry out various transactions with IP (sale, transfer, contribution to the charter capital, etc.), having a clear idea of the real value of the object.
Why do you need an IP valuation?
The valuation of intellectual property most often becomes relevant in such cases:
- Sale of IP rights when it is necessary to establish fair market value.
- Determination of royalties for authorship (for example, in the case of a work or invention created to order).
- Putting intangible assets on the company’s balance sheet – reflecting intangible assets in accounting.
- Contribution of the IP object to the authorised capital (to increase the company’s capitalisation).
- Calculation of payments under licence agreements (franchises, royalties, sublicences, etc.).
- Preparing proposals for creditors or investors where IP is an additional guarantee or valuable asset.
- Licensing – determining the cost of a licensed product.
- Calculation of damages in case of unlawful actions in relation to the IP object (piracy, counterfeiting, unfair competition, etc.).
Features of intangible asset valuation
Valuation of intangible assets requires a comprehensive approach:
- The comparative method (similar to market transactions) is often limited due to the uniqueness of each IP item and the lack of identical analogues.
- Typically, cost, income, or a combination of methods are used, taking into account the income from the use of the asset, the costs of development and implementation, its uniqueness, and monetisation potential.
Since the valuation process requires the analysis of a large amount of data and compliance with legal and standard requirements, it is impossible to determine the real value quickly and by eye.
How CLEVERSHIELD conducts IP valuation
CLEVERSHIELD Agency, relying on many years of successful experience and professional knowledge in the field of intellectual property, provides a detailed report on the valuation of IP objects that meets the following requirements:
- Ukrainian legislation (in particular, the Law of Ukraine “On Valuation of Property, Property Rights and Professional Valuation Activities” and bylaws).
- National assessment standards.
- International standards (IVS, IFRS, etc.), if it is necessary to present data for foreign investors or partners.
The main stages of the assessment:
- Collecting the initial data
- Information about the IP object (its legal status, registration documents, etc.).
- Analysing the industry in which the facility is used, market conditions, and competitors.
- Choosing an assessment methodology
- Calculation of potential income from the use of the facility.
- Cost approach (the cost of creating a similar facility).
- Analysis of possible comparable transactions (if relevant information is available).
- Generating a report
- Explanation of the chosen methodology.
- The final figure of the IP object’s value.
- Recommendations on the optimal use of the property (for example, licensing or sale).
What are the benefits of IP valuation?
- Increase the market value of the enterprise
Recognition of intangible assets on the balance sheet can increase the investment attractiveness of a company.
- Optimisation of the tax burden
Correct valuation can help reduce income tax or increase the economic efficiency of a company (depending on the tax mechanisms of a particular country).
- Transparency of transactions
IP is sold, transferred, or contributed to the charter capital on the basis of reasonable value, which reduces the risk of conflicts or claims from partners and regulatory authorities.
- Building investor confidence
An IP valuation report prepared in accordance with international standards is an additional argument for attracting investment.
Conclusion
Valuation of intellectual property is an important stage in the management of intangible assets of a company or an individual. The correct calculation of the value allows you to make informed business decisions, understand monetisation opportunities and build a long-term development strategy.
CLEVERSHIELD provides professional IP valuation services in accordance with Ukrainian and international standards, providing you with comprehensive support from data collection to preparation of an official report. Contact us and our experts will help you to realise the full potential of your intangible assets!