Valuation of Intellectual Property Assets - Legal Requirements, Economic Aspects and Commercial Solutions, Taking Two Specific Situations and Application of Methods to Other Situations, Need for International Consensus

Abstract

This paper would discuss the valuation process, legal, economic and commercial aspects involved in two of such situations. First is the calculation of damages in an infringement suit where much of the law has already been laid down. However, this paper would suggest and discuss the Method of Econometric valuation which is by far a better method over the conventional methods and which satisfies the requirements of law laid down in UK and US and other important jurisdictions. The second situation analyzed is valuation for royalty calculation in Technology Transfer in which there is a great need as well as scope of negotiation and any valuation done is mainly to justify each party's quotation. This paper would suggest the application of option pricing methods which are used for valuation of financial options, to valuation of intellectual property assets to evaluate a reasonable royalty rate in an arm's length transaction. The last part of the paper would list various other purposes for which valuation of IP assets is done and how these two methods can prove better methods than the conventional methods and would suggest changes in law and need for international consensus in this particular area.