Non-linear corrections in market method of patent valuation

• Authors: Katarzyna Kopczewska , Mateusz Kopyt
• Languages of publication: EN

Abstracts

EN

Intellectual property rights are increasingly becoming an important asset of enterprises, so that an innovative business must carefully decide about the method of its valuation. The existing literature indicates three classical approaches to this issue: cost-based, income-based, and market-based methods, and a few more sophisticated ones such as: the option-based and patent citation methods, with their advantages and disadvantages. This paper proposes a novel methodology of non-linear corrections in the market model of patent valuation, when factors such as time to expiration, copying risk, or momentum in patent life cycle are taken into consideration. The proposed approach, based on evidence of the non-linear impact over time of the abovementioned factors on the value of patent, is anchored primarily in marketing science as well as in the theory and practice of accounting. This fine-tuning raises the accuracy and credibility of the market method of patent valuation.

Keywords

EN

Patent valuation, market method, non-linear linking functions.

• Publisher: Prague Development Center, Czech Republic
• Journal: Business and Economic Horizons
• Year: 2014
• Volume: 10
• Issue: 3
• Pages: 177-190

Dates

published

2014-10-29

Contributors

author

Katarzyna Kopczewska

author

Mateusz Kopyt

References

• Arthur Andersen & Co., 1992. The Valuation of Intangible Assets - Special Report No. P254, The Economist Intelligence Unit, London.
• Gmytrasiewicz, M., Karmańska, A., 2002. Rachunkowość finansowa, Difin, Warszawa.
• International Accounting Standards no 38, online available at: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32008R1126, accessed on 5th Mar.2014
• Kamiyama, S., Sheehan, J., Martinez, C., 2006. Valuation and Exploitation of Intellectual Property, OECD Directorate for Science, Technology and Industry, STI Working Paper 2006/5, http://dx.doi.org/10.1787/18151965
• Layne-Farrar, A., Padilla, J. A., Schmalensee, R., 2007. Pricing patents for licensing in standard setting organizations: making sense of FRAND commitments, CEMFI Working Paper No. 0702, January
• Mard, M.J., Hyden, S., Rigby, J.S., 2000. Intellectual Property Valuation, Financial Valuation Group, Los Angeles
• Megantz, R. C., 2002. Technology Management, John Wiley&Sons, New York
• Pitkethly, R., 2002. The Valuation of Patents: A Review of Patent Valuation Methods With Consideration of Option Based Methods and the Potential for Further Research, Background Paper for Discussion, United National - Economic and Social Council, OPA/CONF.1/2002/6, 21 August, http://www.unece.org/fileadmin/DAM/ie/enterp/documents/taskf6.pdf, accessed on 29th Mar. 2014
• Pugatch, M.P., 2005. What is the Value of Your Patent? Theory, Myth and Reality, in: Jensen, A.
• Pugatch, M.P., (eds). Intellectual Property Frontiers – Expanding the Borders of Discussion, Stockholm Network: London, December
• Reilly, R., Schweihs, R., 1998. Valuing Intangible Assets, McGraw-Hill, Boston, MA.
• Rozek, R. P, Korenko G. G., 2006. What is an Idea Worth? in: Pugatch, M.P., ed. The Intellectual Property Debate: Perspectives from Law, Economics and Political Economy, Edward Elgar, Cheltenham, UK.
• http://dx.doi.org/10.4337/9781847201782.00012
• von Scheffer, G., Zieger, M., 2005. Methods for patent valuation, International Conference on "IP as an economic asset: key issues in exploitation and valuation", Berlin, July 1st, http://www.oecd.org/science/sci-tech/35428822.pdf, accessed on 4th Mar.2014
• Smith, G. V., Parr, L. R., 2000. Valuation of Intellectual Property and Intangible Assets (3rd edition), John Wiley&Sons, New York
• Sullivan, P. H., 1994. Royalty Rates conform to 'Industry Norm', les Nouvelles XXIX (3), pp.140-146
• Tonisson, L., Maicher, L., 2012. Patents, their importance and valuation methods, Fraunhofer MOEZ Working Paper, issue 3/2012, http://www.moez.fraunhofer.de/content/dam/moez/de/documents/Working_Paper/WP2012 Nr.1_Patent-Valuation_final.pdf, accessed on 20th Mar. 2014.
• Wirtz, H., 2012. Valuation of Intellectual Property: A Review of Approaches and Methods, International Journal of Business and Management, Vol. 7, No. 9, May

Identifiers

DOI

http://dx.doi.org/10.15208/beh.2014.15