Intellectual property (IP) is a valuable asset for any product innovator, but how do you measure its worth? Whether you want to sell, license, or protect your IP, you need to have a clear and credible estimate of its value. In this article, you will learn some basic methods and factors to consider when calculating the value of your IP.
One way to value your IP is to estimate how much it cost you to create and maintain it. This includes the expenses for research and development, design, testing, patenting, and marketing. The cost-based approach assumes that your IP has a value equal to or higher than what you invested in it. However, this method does not account for the potential income or competitive advantage that your IP can generate.
é uma tarefa difícil. Envolve analisar o custo do desenvolvimento e inova??o internos de uma empresa, o potencial de crescimento e lucro e potencial de competir no mercado. A chave para entender o valor da propriedade intelectual de uma empresa reside em determinar sua contribui??o para o sucesso dos negócios, quanto tempo leva para atingir seus objetivos e o retorno dos investimentos da propriedade intelectual.
A cost-based approach is not a bad starting point but you've to remember a few things: 1. You could've spent a lot more in creating your product than you should have. A simple example: building software in the US costs a lot more money than building an equivalent piece of software in India. So, what should dictate the true cost - what you spent or what you could have potentially spent? 2. Even if your comparison is with a competitor in your geographic region, what if you built your product very effectively cost-wise compared to your competitor? Do you base it on your cost or their cost? 3. Last but certainly not least, what if you spent the right amount of money but built the wrong thing? In other words, one that doesn't have "value".
You can calculate the cost of legal fees (including filing and maintenance fees) over the lifetime of the patent. You may also expand this cost calculation to include the cost of your research and development that generated the IP as well.
Another way to value your IP is to project how much income it can produce for you or your business. This involves estimating the future cash flows, profits, or royalties that your IP can generate over its useful life. The income-based approach considers the market demand, the growth potential, and the risks associated with your IP. However, this method requires a lot of assumptions and uncertainties, and it may not reflect the current market value of your IP.
This is better in many ways than the cost-based approach but it has its share of challenges. First, why it is slightly better than cost-based approach: 1. There is a market for what you built so Product Market Fit was found. 2. You have some real numbers to go off of and do not have to be speculative (or guess). Cons: 1. Just because there is a market for it today, it doesn't mean there would be one tomorrow. 2. What's the demand in future? Sure, you are making an income today through the product but is it going to be sustained?
You can estimate how much income the IP is generating or is likely to generate in the future. This estimation could be based on the portion of revenue streams that can be attributed to that particular IP.
A third way to value your IP is to compare it with similar or comparable IP that has been sold or licensed in the market. This involves finding relevant data on the prices, terms, and conditions of the transactions involving IP similar to yours. The market-based approach reflects the current market value and the supply and demand of your IP. However, this method may be difficult to apply if there is no reliable or sufficient data available, or if your IP is unique or novel.
I like this approach the best as I see it as a fair indicator of the value of your IP. It will require plenty of research and crunching numbers, and some extrapolation, but it removes your efficiencies (or lack, thereof) from the picture and also, doesn't rely too much (if at all) on your current income. Rather, it focuses on the "true value" of your offerings based on the overall market and this has better chances of standing the test of time. So what if you are cost-effective and are making some money today? While those are good things that are unquestionably important, they should play less of a role in the valuation of your IP.
A fourth way to value your IP is to combine two or more of the above methods and use a weighted average or a range of values. This allows you to capture the strengths and weaknesses of each method and to cross-check the results. The hybrid approach can provide a more robust and realistic estimate of your IP value. However, this method may require more time and resources, and it may still depend on the quality and availability of the data and assumptions.
Apart from the methods mentioned, there are other elements that can influence the worth of your IP. These include the type and scope of your IP rights and protection, the stage and maturity of your IP development and commercialization, industry and market trends, the competitive landscape, the legal and regulatory environment, as well as the strategic value of your IP for your business or potential buyers or partners. You should bear these factors in mind when selecting and utilizing the methods to value your IP, as well as when negotiating or communicating your IP value to others.