RICS draft guidance note - Valuation of Intellectual Property Rights, Guidance Note, 2nd ed

RICS draft guidance note - Valuation of IP Rights, 2nd edition

The market approach

Paragraph 50.4 of IVS 210 states:

'The heterogeneous nature of intangible assets and the fact that intangible assets seldom transact separately from other assets means that it is rarely possible to find market evidence of transactions involving identical assets. If there is market evidence at all, it is usually in respect of assets that are similar, but not identical.'

Thus, it may be necessary to make 'adjustments ... to reflect differences between the subject asset and those involved in the transactions' (paragraph 50.5 of IVS 210).

For artistic-, brand- and tech-IP, the following characteristics should be considered as they influence the extent of comparability:

type of underlying IP

breadth and extent of available legal rights

remaining term of protection

industry and subsector

characteristics of the markets in which the subject IP and comparable IP operate

market position and trends in market performance

proximity in time between the valuation data and comparable transaction and

for royalty rates, terms of the licence agreement including up-front payments, duration and exclusivity.

Brand-IP

Further comparability criteria that should be considered for brand-IP include:

price positioning

brand equity and stage of development

market position and

level of advertising support.

Tech-IP

Further comparability criteria that should be considered for tech-IP include:

the specific purpose of the technology and its importance to product/process performance

stage of development, including proof of concept and proof of economic viability

whether the patent has been granted or whether it is still at application stage and the quality of patent claims

proof of freedom to operate and

ease of infringement detection and enforcement.

Artistic-IP

Further comparability criteria that should be considered for artistic-IP include:

reputation of the author of the artistic work

type and genre of artistic work and

ability to control unauthorised use of the artistic work.

Data-IP

Further comparability criteria that should be considered for data-IP include:

difficulty in collection of data of equivalent utility

depth and breadth of data

uniqueness and difficulty of replication

quality and usability

legal restrictions to data use and

number of potential applications and users of the data.