Some of the commonly used methodologies for valuation of intellectual property (IP) are Cost-based method (principle of substitution), Income-based method (discounted cash flow) and Market-based method (price of comparable asset in market). Though the methodologies appear pretty straight forward, the results can go haywire unless the valuations are done keeping in view the technology market dynamics. It is well known that the same valuation method cannot be flatly applied in all cases and hence one arrives at a range of figures when different methods are applied.
While a seller would negotiate to get the maximum value of an IP, a buyer would negotiate to get the same IP at the minimum possible value. Though the perspective from which valuation of IP is done changes with the purpose of valuation, it is the ability to do “Technology Forecasting” where the thought processes of the buyer and the seller converge.
While a buyer may end up paying a heavy price for an IP which might face obsolescence due to competing technology or government policies, a seller may end up losing an IP at low price, in case he fails to see the promise in the related technology in near future. Thus the exercise of valuation needs the involvement of people who have hands-on experience in the related industry as they are the best judge to see the pros and cons of implementing a particular concept in view of a changing technology landscape which can drastically affect the value of an IP.
In fact, “Technology Forecasting” by domain experts is one of the key determinants in the valuation of intellectual property which can make or break the fortune of a company.
While a seller would negotiate to get the maximum value of an IP, a buyer would negotiate to get the same IP at the minimum possible value. Though the perspective from which valuation of IP is done changes with the purpose of valuation, it is the ability to do “Technology Forecasting” where the thought processes of the buyer and the seller converge.
While a buyer may end up paying a heavy price for an IP which might face obsolescence due to competing technology or government policies, a seller may end up losing an IP at low price, in case he fails to see the promise in the related technology in near future. Thus the exercise of valuation needs the involvement of people who have hands-on experience in the related industry as they are the best judge to see the pros and cons of implementing a particular concept in view of a changing technology landscape which can drastically affect the value of an IP.
In fact, “Technology Forecasting” by domain experts is one of the key determinants in the valuation of intellectual property which can make or break the fortune of a company.
