Trademark Valuation

A trademark is "a word, phrase, symbol and/or design that identifies and distinguishes the source of the goods of one party from those of another."[1] While the above definition is fairly broad, the narrow cast is that the mark should provide an economic benefit or advantage to the owner to support a value.

The most common brands or trademarks are those known to consumers. Company names/brands that are most well-known are Google, Apple and Amazon, which also the most valuable. The trademark allows a firm to capture and hold more market share, increase revenues, or charge premium prices, or a combination of one or more of these attributes.

The typical three approaches to value – cost, market, and income – should be considered. Usually, historical (or even current) cost to recreate the mark is a poor indicator of value. The market concept is, at best, difficult to utilize, for these reasons.

1. Few transactions are conducted (or even published) for an individual trademark. If this IP is sold, it is often in the context of a sale of a business or business assets.
2. How does one compare different marks, even in the same or similar industry? For private firms, getting the proper data on market share and premium pricing is often limited.

Left with an income approach, what are the alternative techniques to measure the incremental cashflows specific to the trademark or trade name?

• A common methodology is "relief from royalty," which determines a reasonable royalty payment that is foregone. In other words, what is the amount of the royalty a firm would pay to use this IP to produce added cash flows?

• A second approach, often part of an infringement lawsuit, is termed "with" and "without." Good examples are consumer brands that sell at higher prices than generics. The presumption herein is that the difference in these two analytics is the brand value.