What are the Definition and the Purpose of Intellectual property Valuation?

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What are the Definition and the Purpose of Intellectual property Valuation?

Valuation of Intellectual property helps owners and administrators of that property to make optimal decisions, including decisions about the most financially efficient way to use, protect or transfer that asset on the market in order to maximize its value.

Definition of intellectual property valuation

Intellectual property valuation is defined as determining the value of the intellectual property at a specific point in time under specific conditions.

The concept of intellectual property value is considered in terms of its ability to generate future economic benefits, or its commercial potential, relative to the present moment. In other words, the “value” of the intellectual property is the objective of the valuation.

Purpose of intellectual property valuation

The main purpose of intellectual property valuation is to accurately, completely, and objectively determine the value of that property, thereby helping the owner and administrator of that property to make optimal decisions, including decisions about the most economically efficient way to use, protect, or exchange the asset in the marketplace in order to maximize its value.

The main goal of intellectual property valuation is to evaluate the value of a property precisely, totally, and objectively, making it possible for the owner and administrator of that property to make the best decisions, such as decisions about the most financially efficient way to utilize, protect, or transfer the property in the marketplace to enhance competitive advantage.

For businesses, there are many reasons why intellectual property valuation benefits them:

  • Internal management of the intellectual property of the enterprise;
  • Transfer of ownership or right to use: determine the value of the transfer agreement;
  • Mergers and acquisitions: determining the value of an enterprise based on the proportion (contribution level) of intellectual property to the total market value of the enterprise;
  • Contributing investment capital, entering into joint venture contracts, establishing strategic alliances: accurately determining the value of the respective ownership share (contributing capital) of the enterprise in an investment project or joint venture. business association;
  • Mobilizing capital, investing in further development of intellectual property;
  • Cost savings: identifying intellectual assets with potential economic value to continue to grow, discarding those that are no longer valuable or do not provide benefits that outweigh the costs of doing business;
  • Equitization, issue of shares: determining the value of the enterprise and its intellectual property when participating in equitization or issuing shares to the public;
  • Support in dispute resolution: determining the extent and value of the damage caused by infringements of intellectual property rights, determining the value of infringing goods, assisting in dispute resolution in case of bankruptcy, breach of contract, inheritance, etc.
  • Enjoy preferential tax from donations: The valuation of donated intellectual property (usually to non-profit organizations) serves as the basis for tax authorities to calculate tax incentives for the donating business.
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