How to Value Intellectual Property: Everything You Need to Know
If you want to learn how to value intellectual property, you’ll need to be familiar with the different types of IP rights that are available your business.3 min read
If you want to learn how to value intellectual property, then you’ll need to be familiar with the different types of intellectual property (IP) rights that are available to you and your business. The most valuable IP rights are those that have a competitive edge over businesses operating in a similar industry. Therefore, if you have several other large companies you’re in competition with, you’ll want to ensure that you have the best product available to the public, which will thereby increase your profits and brand, and also increase your IP valuation.
When it comes to IP rights, one of the most popular types of IP rights is the patent. There are several types of patents, including:
The design patent protects the design of your creation. This can relate to your brand and overall look of your product. This can be the key to increasing sales of your product, and you’ll want to prevent competitors from being able to create similar products.
The utility patent protects the functional aspect of your invention. Therefore, this invention should provide the answer to questions regarding what your invention actually does and how it would prevent competitors from being able to do the same thing.
A plant patent protects the invention of new plants. This is common for those operating in the farming industry, as such farmers generally use a variation of 2 or more plants to create new plant species.
A trademark protects your brand and mark. You want your mark to stand out above the competitors, showcasing that your product has a distinct mark. While trademarks are limited in value in the beginning, such value can increase over time, with the more popular your brand becomes. Furthermore, when your product gains popularity for its quality, then your mark will continue to gain valuation.
Regardless of what type of intellectual property right you are dealing with, you should consult a licensed and qualified attorney to help you value your intellectual property right and identify what course of action is best for your brand and product.
Advantages of Intellectual Property Valuation
Being able to properly value your IP is important. Having patent, trademark, and/or copyright protection over your IP can help your company grow because it shows ownership over intangible assets while also the exclusive right for its use. Such protection will protect you in the event that another party infringes on your IP rights. But while valuing your IP is important, it can be quite hard to do. A lot of factors need to be taken into account when identifying the value of one or more of your IP rights. However, conducting such valuation can have several benefits, including the following:
- Streamline the licensing process, i.e. licensing out your IP right so that another can use it, while you charge a fee for such use
- Increases your business’s value, as you can use such IP valuation as collateral on loans or mortgages
- Increase capital, particularly for new businesses trying to obtain capital from new investors
Quantitative vs. Qualitative Valuation
When calculating the value of your IP, there are two methods that could be used: quantitative and qualitative. The qualitative method tries to estimate non-monetary value on the value of IP by rating it by the effect on customers, brand loyalty, the impact on the business’s growth, and other metrics that don’t involve numbers. The quantitative approach simply measures the valuation on numerical data that is produced from past client purchases and market data. It could also look at transactions and sales of a similar product in the same industry, the cost of obtaining IP protection for that product, and the price of replacing any gains made by the IP through another method.
These two valuation methods should not be used interchangeably, as most companies choose one approach over another. This will depend on your short and long-term goals, objectives, and needs of your business. However, some businesses will look at both approaches to see what the outcome of each is.
If you need help learning more about how to value your IP right, or if you need assistance with determining what type of IP protection you should seek, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5-percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.