Falcon Invoice Discounting: Unlock Your Business Potential
Valuation and Monetization of Corporate IP
1. Valuation and Monetization
of Corporate IP
ICLE Intellectual Property Spring Seminar
March 16, 2009
Presented by:
Weston Anson
CONSOR Intellectual Asset Management
800.454.9091 www.consor.com
Five Critical Elements of Value
Maximization
1. Know where maximum strategic and realizable value is
to be found in the asset portfolio
2. Establish a realistic current market value for the assets
3. Understand how to extract maximum value from the
assets
4. Select the best possible intellectual property / intangible
asset strategy for the situation
5. Manage the process
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2. Who Cares About Maximizing IP Value?
Merger and Other Stakeholders
Acquisition Interests Internal Asset Managers
Shareholders Partners
Tax Authorities International Affiliates
Auditors The Media
Wall Street Analysts Finders of Fact
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Value Maximization Alternatives
Licensing
Auction
Sale
Collateralization
Securitization
Competitive Disposition
IP Holding Companies
Joint Venture
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3. Asset Groups that can be Monetized
Patents Internet Assets
Technology Copyright Portfolios
Contracts
Software/IT
Licenses
Trademarks
Lawsuit Rights
Databases
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Identification, Bundling, and Triage
From a valuation perspective, intangible assets are
best viewed as an integrated bundle:
Difficult to Isolate
Complementary
Travel in Groups
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3
4. Bundles of Intangible Assets
Marketing Bundle IT Bundle Technical Bundle
Primary trademark Enterprise solutions Key patents
Corporate name and logo Custom applications Trade secrets
Marketing umbrella Data warehouses Formulae
Sub-brand names
Sub- Master licenses Packaging technology and sources
Core brand Source code Shapes and sizes
Worldwide trademark registration Databases Process technology
Copyrights Data mining Design technology
Secondary trademarks Domain names / URLs Proprietary test results
Packaging design and copyrights e-Commerce sites Plant and production design
Trade dress Third party software Product specifications
tools
Characters Credit/payment systems Operating platforms
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Multiple Licensing Strategies
Retail licensing Brand extension licensing
Hybrid licensing Endorsement licensing
Online licensing Co-brand licensing
Ingredient licensing Cross licensing
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5. Licensing Royalty Rates
Royalty Rate Distribution
There is no typical
royalty rate. 20
The most frequent 18
16
% of agreements
rate is 5% 14
39% of agreements 12
10
are for less 8
42% of agreements 6
4
are for more. 2
0
Source: RoyaltyStat.com
1% 3 5 7 9 11 13 15 >
Annual Rate
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Royalty Rates - Trademarks
Corporate Brand Trademark Royalty Rates
Relative to Product Type
18.0%
15.0%
12.0%
6.0-
15.0%
9.0%
4.0-
11.0%
6.0%
2.0-
7.0%
3.0% 0.5-
3.5%
0.0%
Consum er Com m ercial Industrial Com m odity
* Plus or minus two standard deviations from mean, all trademark licenses.
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6. Effect of Parties Relationship on
Trademark Royalty Rates
International Corporate Brand/Trademark Royalty Rates
Relative to Licensor/Licensee Relationship
12.0%
9.0%
4.0 -
11.5%
3.0 -
6.0%
9.0%
2.0 -
7.0% 1.0 -
3.0% 5.5%
0.0%
Pure 3rd Party Affiliates Subsidiaries Inter-Company
* Cluster analysis plus or minus two standard deviations from mean.
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Royalty Rates - Technology
Industry Range
Aerospace 2.0% - 15.0%
Chemical 1.0% - 10.0%
Health Care Equipment 5.0% - 10.0%
Electronics 3.0% - 12.0%
Medical Equipment 3.0% - 5.0%
Software 5.0% - 15.0%
Semiconductors 1.0% - 2.0%
Pharmaceuticals 5.0% - 20.0%
Diagnostics 2.0% - 5.0%
Source: Les Nouvelle
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7. The Process of Extracting Value
Timing
Setting
People
Paper
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Value Extraction Strategies
Disposition
Liquefaction
Leverage
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7
9. Leverage
Traditional Licensing
Other Licensing Models
Joint Venture
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The Negotiating Environment
Timing
Relative strength
Relative need
Economic power
The state of the market
Available alternatives
Guideline pricing
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10. Value Maximization Case Studies
Licensing IBM, Kmart
Collins & Aikman,
Sale
Jenny Craig
Collateralization Polaroid, Delphi
Dunkin Brands,
Securitization
Gloria Vanderbilt
AstroTurf,
Auction
Tower Records
Holding Company Chiquita Brands
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IP Valuation
Traditional Valuation Methodologies
• Cost
• Market
• Income
• Relief from Royalty
Alternative Valuation Techniques
• Statistical Modeling (Trademarks)
• Real Options Approach (Patents)
• Other
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11. Standards of Value
Fair Market Value
• The price at which property would change hands between
a willing buyer and a willing seller when the former is not
under any compulsion to buy and the latter is not under
any compulsion to sell, both parties having reasonable
knowledge of relevant facts. (IRS-Hypothetical)
(IRS-
Fair Value
• The amount at which an asset could be bought or sold in a
current transaction between specific, willing parties, that is,
other than in a forced or liquidation sale. (FASB-Specific
(FASB-
synergies)
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Statistical Valuation (Trademarks)
Internally generated trademark values are not
reported in financial statements, but …
Acquired trademarks are now valued and
reported (FASB SFAS 141&142)
Statistical modeling can be applied to derive a
valuation formula based on these reported
trademark values
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12. Statistical Valuation (cont.)
We have developed a model that calculates
trademark values as a function of:
• Annual sales the trademark supports
• Context in which the trademark was acquired (e.g.
liquidation or going concern)
• Global/domestic scope of the trademark use
• Industry where the trademarks are used
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Statistical Valuation (cont.)
Conclusions:
• Given the statistical model, trademark values can now
be determined under a variety of contexts (e.g.
internally generated trademarks in bankruptcy)
• Average liquidation value for trademarks is only
13.6% of the going concern value
• Global trademarks are, on average, 10.8% more
valuable (versus domestic) for the same level of
sales
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