A patent is a set of exclusive
rights granted to an inventor or their assignee for a limited period of time,
in exchange for the public disclosure of the invention. An invention is a
solution to a specific technological problem which helps in inventing something
new or which helps in increasing the efficiency of a process.
In the current context, the
intangible plays a significant part in creating value preposition of the
company. The business value covers both the tangible and intangibles. Valuation
of intangibles becomes relevant when there is a need to do purchase price
allocation i.e. when you want to allocate the excess of the consideration paid
for acquiring the asset over and above the tangible assets.
In the current context, the
intangible plays a significant part in creating value preposition of the
company. The business value covers both the tangible and intangibles. Valuation
of intangibles becomes relevant when there is a need to do purchase price
allocation i.e. when you want to allocate the excess of the consideration paid
for acquiring the asset over and above the tangible assets.
Historically the excess
consideration paid over and above the tangible assets is adjusted as goodwill, however if we can identify the tangible assets of business then allocation of
value can be made to it and post this balance left is considered as goodwill.
In the books of account the
intangible finds a place if it is acquired from outside, however if it is self
generated then its impact is not considered in the books of account.
Valuation of patent
Traditionally, there are three
approaches to valuation
·
Cost Approach
·
Market Approach
·
Income approach
Ideally, all three approaches need to be
looked at while deciding the value of patent. However, we give preference to
income approach for valuing unique, income generating properties such as
patents.
A cost approach is seldom useful
for patents, and market approach may not be relevant because patent are unique
by definition and comparable patents may be difficult to identify.
The most prominent approach to
patent valuation is income approach which considers method like royalty based
or profit contribution method which can factor in the cash flow stream
generated by patent.
Check-list of documents needed to be taken care while assigning value to patent are -
Ø Check
whether the patent is in force or not and patent maintenance fee is paid or not
if not patent is worthless.
Ø Description
of any litigation, past or present.
Ø Copies
of any contract, licensing agreement or offer to license pertaining to patent.
Ø Available
economic data on the industry in which invention is used.
Ø Useful
life of patent.
Ø Inquire
about patent validated.
Ø Details
of any prior royalties paid for patent.
Ø Identify
the next best alternative technology.
Ø The projected cash flow from patent.
Mr. Maneesh Srivastava
Sr. Manager
Email:- maneesh@indiacp.com
Sr. Manager
Corporate Professionals
+9111406222255, +919871026040,Email:- maneesh@indiacp.com
