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Based in Melbourne (Victoria) we deliver business valuations all over Australia using expert business valuers and resources that allow us to work remotely.

We have completed:

Contact Us

L3/162 Collins St, Melbourne, 3000

0421 069 717

m.williams@exitvalue.com.au 

What Is an Intellectual Property Valuation?

Intellectual Property Valuation (or IP Valuation) is no different to normal business valuation except that the assets being valued:

  • Are mostly intangible

  • Typically have no current cash flows

  • Are unique​

  • Often subject to complex legal arrangements.

IP valuations are typically based on a financial analysis which makes assumptions that do not always reflect reality, or rely on estimates to deal with the value of patents, registrations, trademarks or designs.

IP valuation is often at the centre of technology business valuation which make bold assumptions on future revenue and costs, or are intimately tied to other traditional cash flows.

Historic transactions are often used as a guide in intellectual property valuations, but these do not always take into account the uniqueness of new or existing IP and make assumptions about inferring value.

So many would be forgiven in saying the IP valuation is more guess work that rigorous analysis.  What is critical is to take a multi-disciplinary approach that takes into account technical capability of the IP, legal complexities of how IP is deployed in commercial arrangements as well as the "pure" IP valuation approaches. 

The principles of tra​nsparancy, repeatability, use of methods consistent with international best practice and a chain of evidence reduce the uncertainty associated with any IP valuation opinion.

Key Drivers of a Intellectual Property Valuation

The drivers of any Intellectual Property valuation is based around typical valuation approaches:

  • Market methods

  • Income methods

  • Asset or cost methods

A variant of the last method is the elimination method which considers the IP valuation as the difference between the value of the whole business the IP is associated with (if a business is in operation) and the value of the tangible assets of the business.  This method cannot be used for start-ups or stand-alone technology IP valuation.

We take a structured process involving:

  • Documenting the source of the IP.

  • Documenting the key benefits (tangible and intangible) associated with the IP.

  • Select the most appropriate approach to suit your valuation requirement (above methods).

 

IP valuation using any comparable IP transaction has a high degree of uncertainty, often related to the uniqueness of IP.  However these methods can be used to gauge broad paramters that can be used by other methods.

In most cases IP valuation is looking to a number of cash flow scenarios that can be equated back to the value of the IP itself.  This requires detailed analysis and understanding of how IP is deployed with other assets and to what extent the value of the IP relies on other assets or commercial arrangements.

In the absence of income methods, or sometimes in support of these, IP is valued on an asset or cost basis - what would it cost to replace the IP if the owner was deprived of the asset?

As long as these methods and the associated analysis is completed with consistency and transparency, then the IP valuation will represent an opinion with evidence.  The more accurate the analysis, the less uncertainty will be associated with the opinion.

Key Intellectual Property Industry Statistics

There is no single industry associated with intellectual properrty, however the Australian Intellecutal Property Report 2018, issued by IP Australia, has reported a number of trends such as:

  • IP Australia have received 28,905 standard patent applicationsIn 2017, a 2% increase compared to 2016

  • 22,742 standard patents were granted in 2017, a fall of
    4% from 2016.

  • IP Australia recieved 76,594 trade mark applications in 2017, a 7% increase off a 3% drop in 2016.

  • The top 5 patent applicants were Aristocrate Technologies, CSIRO, University, Bluescope Steel, Monash University

  • The top 5 fields where patentis have been granted include pharmaceuticals, medical devices, polymers and applied chemistry, computing, electronics and communication.

We have collated industry performance statistics based on ABS data and detailed them in a whitepaper, which can be downloaded from the link below.

What Makes a Business Highly Valuable?

SME Performance Whitepaper

Our IP Valuation Experience

Our IP valuation experience has included including valuations for:

  • Operational IP associated with franchised hairdressing chain

  • Brand value of fashion accessories brand at centre of commercial dispute

  • Value of rights contract associated with use of technology

  • Value of technology associated with new medical device

  • Value of software platform involved with POS devices

  • Value of website platform in online training venture

  • Value of ongoing payments for use of store brand

  • Goodwill associated with multiple business