, 18–19 Intellectual Property Valuation in Business ... · The Challenges of IP Valuation Peter...
15
The Challenges of IP Valuation Peter Kaldos Hungarian Patent Office H – 1054 Budapest Garibaldi u. 2 [email protected] Tel: +36 1 474 5814 , 18–19 Intellectual Property Valuation in Business | Helsinki, May 2009 You can‘t manage what you can‘t measure Peter Drucker "the father of modern management”
Transcript of , 18–19 Intellectual Property Valuation in Business ... · The Challenges of IP Valuation Peter...
The Challenges of IP Valuation
Peter Kaldos
Hungarian Patent Office
H – 1054 BudapestGaribaldi u. 2
[email protected]: +36 1 474 5814
, 18–19 Intellectual Property Valuation in Business | Helsinki, May 2009
You can‘t manage
what you can‘t measure
Peter Drucker "the father of modern management”
…to capture and increase business value
from IP assets through enabling optimum
management decisions
Why value Intellectual Property in business?
Important points:
• Introduction to IP valuation – Why value IP?– Approaches to IP valuation
• IP valuation at the Hungarian Patent Office– IP valuation pilot project
• High tech spin‐off company
• Specialisation: Real‐time microscopy + software development
• Market: Cutting‐edge brain research and pharmaceutical development
• Product line: Laser scanning microscopes + software
• Patent application (2007) for real time non‐linear microscope solution
Hungarian Patent Office IP Valuation Pilot Project (2009):„Research Microscope Technology”
© 2008 Juan Eduardo Donoso
= clearly defined patentable technology
Decisions, decisions…
Develop IP further?
Abandon patent?
Commercialise IP?
License out IP?
Sell IP to competitor?
Required information:
How much is the IP worth to the company? (internal value)
How much can we license it for / sell it? (market value)
What factors are opportunities and make the IP valuable?
What uncertainty factors are there which decrease the IP value?
How can we increase the value of the IP??
Why value IP in innovative organisations?
Access to financing
Business related and company law
IP Transfer transactions
Internal management
Accounting and taxation
Intellectual Asset Management +
Enabling management decisions
• Means to initiate dialogue
• Identify uncertainties / opportunities
• Decisions whether to file for patent protection
• Internal investment decisions
• Commercialise or licence out decisions
• Economic efficiency analysis / value orientated management
•….
Access to financing
Business related and company law
IP Transfer transactions
Internal management
Accounting and taxation
• Company formation (contribution in kind)
• Company transactions
• Due diligence
• Mergers and acquisitions
• Capital increase
• IPO
• Valuation of enterprise
• ….
Why value IP in innovative organisations?
Access to financing
Business related and company law
IP Transfer transactions
Internal management
Accounting and taxation
Technology transfer:
• Licence‐in / license‐out (with royalty stream)
• Sale of IP
• Alliance or partnership/joint venture
• Technology access
• Patent pools
• Employee inventor compensation related to technology transfer
Why value IP in innovative organisations?
Access to financing
Business related and company law
IP Transfer transactions
Internal management
Accounting and taxation
• Use of IP to attract investment
• Use of IP to attract venture capital
• IP as collateral for bank loans
• Showing the significance of IP when applying for grants and tenders
Why value IP in innovative organisations?
Access to financing
Business related and company law
IP Transfer transactions
Internal management
Accounting and taxation
• Taxation, Corporate Tax• Financial Accounting• Reporting
Why value IP in innovative organisations?
Challenge:
How do we assess the value of technoIogy / intellectual property?
Commonly used IP valuation methods:
quantitative qualitative
Assessment of the monetary value of IP
Analysis of IP based on factors which influence it’s value.
Cost Based Methods
Market Based Methods
Income Based Methods
(Option pricing based
methods)
Value indicator methods
=Cost Based Methods
Historic cost
Replication cost
Replacement cost
Measure IP value through the calculation of costs incurred in the development of:
• the IP asset under valuation • a similar IP asset in‐house
• a similar IP asset externally
=Market Based Methods
Comparable market value
Comparable royalty rate
Measure IP value through comparison with prices achieved in recent comparable transactions.
=Income Based Methods
Discounted Cash Flow (DCF)
Risk adjusted net present value
(rNPV)
Relief from Royalty
Measure IP value through estimating the potential future income from subject IP and discounting these
Patent information related value indicators
=Cost Based Methods
Value indicator methods
Value indicators
based method
Provide a value guide through scoring of different factors related to the IP.
These factors or “value indicators” can influence the value of the IP both positively and negatively.
Challenge: What are the appropriate IP valuation methods to use?
Quantitative Methodology Quali-tative
Cost based
Income based
Market based
Value indicators
based
*Internal Management * *Sale Price * *Licence (*) (*) (*)M &A * *Collateral for loans *Infringement Litigation *Financial Accounting *Taxation, Corporate Tax * *
Source: Watanabe, 2002.
Reasons for valuation
(*)
(*)= used to some extent*= used widely
*
IP Valuation Pilot Project (2009): Methodology toolbox
qualitative analysis tool
quantitative assessment tool
+ = Robust valuation
≈50 factors identified in 5 categories Each factor can affect the value of the IP positively or negatively
Each factor is represented by an indicatior
Experts in working group interviewed regarding each indicator
Value indicators based method
Results:
• Identification of uncertainties and opportunities related to the IP
• Analysis of uncertainties and opportunities
• Internal value of IP (qualitative score)
• Market value of IP (qualitative score)
Internal management
Risk- Opportunity
Financing
Management
IP protection status low
Low industry importance of technology / No financial capacity to cover patent fees
Low know ledge of potential applications / Uncertain regulatory issues
High scientif ic proficiency to enforce rights / No legal proceedings against technology
Market
Technology
Legal
Purpose of technology to w in new markets / Importance of technology to company / Good technology and business strategy alignment
No specialist skills req’d for utilisation / High marketing and communication value
Technical superiority / Easy to identify infringement / Good complementary technologies
Low investment req’d for production equipment / High contribution of technology to prof its
Good breadth of patent application / Good IP Know ledge to enforce rights
-50 0 50
Uncertainty – opportunity matrix
Discounted Cash Flow (DCF) method
Determine the potential cash flow from the IP
Discount the cash flow using appropriate discount rates related to the perceived level of risk
Experts in working group interviewed
Results:
• Internal values of IP using different discount rates (EUROs)
• Market values of IP using different discount rates (EUROs)
Internal managementIP Transfer transactions
Diagram 3: Annual Discounted Cash Flow
-5000
5001000150020002500300035004000450050005500600065007000750080008500
2007
2008
2009
2010
2011
2012
2013
2014
2015
2018
Year
Valu
e (m
illio
n H
UF)
Risk free (10%) Risk adjusted (20%) Venture Capital (50%)
Annual discounted cash flow technology using different discount rates
Diagram 1: Technology Present Value with different discount rates
0
10000
20000
30000
40000
50000
60000
DCF
valu
e(ri
sk fr
eedi
scou
nt ra
te)
DC
F va
lue
(risk
adj
uste
d)
DCF
Valu
e(D
isco
unt r
ate
30%
)
DC
F Va
lue
(Dis
coun
t rat
e40
%)
DC
F Va
lue
(VEN
TUR
EC
APIT
ALR
ATE)
Discount Rates (%)
Pres
ent V
alue
(mill
ion
HU
F)
Present value of technology using different discount rates
Challenge: How can the results of an IP valuation capture and increase business value?
Diagram 1: Technology Present Value with different discount rates
0
10000
20000
30000
40000
50000
60000
DCF
valu
e(ri
sk fr
eedi
scou
nt ra
te)
DC
F va
lue
(risk
adj
uste
d)
DCF
Valu
e(D
isco
unt r
ate
30%
)
DC
F Va
lue
(Dis
coun
t rat
e40
%)
DC
F Va
lue
(VEN
TUR
EC
APIT
ALR
ATE)
Discount Rates (%)
Pres
ent V
alue
(mill
ion
HU
F)
Diagram 3: Annual Discounted Cash Flow
-5000
5001000150020002500300035004000450050005500600065007000750080008500
2007
2008
2009
2010
2011
2012
2013
2014
2015
2018
Year
Valu
e (m
illio
n H
UF)
Risk free (10%) Risk adjusted (20%) Venture Capital (50%)
Risk- Opportunity
Financing
Management
Market
Technology
Legal
By providing the required information…
…. to enable optimum managment decisions regarding IP
Develop IP further!
Abandon patent!
Commercialise IP!
License out IP!
Sell IP to competitor!
Thank you
Peter Kaldos
Hungarian Patent Office
H – 1054 BudapestGaribaldi u. 2
[email protected]: +36 1 474 5814
