There Are Many Ways to Valuate Intellectual Property

IP News

What’s a great idea really worth? Many businesses, inventors and entrepreneurs come up with incredibly innovative ideas every day. Some of those ideas become products, while others remain in the concept stage and still others never amount to anything. For those ideas that move beyond a concept, many times the biggest hurdle along the path to success then becomes determining the true value of the idea, methodology, trade secret or product. Therein lies one of the key questions to any great invention: how much is it really worth? The answer can be found through the process known as valuation.

Standard IP Valuation Methods

There are several possible factors that can play a role in valuating intangible assets. In fact, when it comes to determining the value of intellectual property, there are many paths one can take to reach a conclusion. The valuation process is relatively new and as such it is still developing. In addition, because there are many different situations in which the valuation process is used, there are several different methods of valuation, as well. While the approaches may vary, there are several current methods to valuation that most experts in the field consider standard. They are:

Market Method – this method involves a comparison of current assets on the market that are similar, or that have similar uses. By understanding the value of these similar products that are already on the market one can determine within reason the value of the comparable asset in question.
Income Method – the income method determines the value of the IP asset by predicting future income based on the present value of the asset in the current market. In other words, this method uses the past to predict the future. The future financial value of an IP asset is based on the past financial results it has already had, together with current trends in the industry and its competitive results.
Cost Method – this method is very commonly used to determine the value of an asset. It essentially consists of placing a value on a product based on the expense incurred to develop it. While this approach can be good for products that have not yet reached the market, it might not be as useful for products that have already been marketed and sold and that have produced actual revenue. In addition, the real value of a product is often much greater than simply the cost to create it.

Which Method Is Right for You?

When trying to decide which IP valuation method one should use, there are also several factors that need to be considered, which include, but are not limited to the following:

• Is the asset unique and if so, how does it stand out?
• What kind of data is already available and can it be verified?
• For what reason is the analysis being performed?
• The judgment and previous experience of the person doing the analysis

IP Valuation You Can Depend on

As you can see, when it comes to IP valuation there are many methods and factors one can use to reach the same conclusion. All of these methods will continue to develop and change over time. In addition, as the IP industry changes so will the business and methods of IP valuation. At IPTrader, we use many different approaches to IP valuation in order to determine the true value of your assets. If you have a great idea that you want to monetize, then contact us at IPTrader. Helping you buy, sell or license your intellectual property is our business. Click here to send us your information online.