Intellectual Property (IP) has been adopted as a catchall for many different types of intangible assets. The valuation of various IP is a unique specialty of The Mentor Group.
If a company did not acquire its IP, and only developed it internally, the Balance Sheet will not reflect any IP amount. Likely, the only way that IP will be valued is if it is transferred to another entity. The amount of fair market value in excess of cost basis may be subject to a tax. While some discussion has surfaced within the Financial Accounting Standards Board to include a marked-to-market IP value for public companies, there is no current mandate for same.
In the continuing surge of technological innovation, IP often comprises 40% plus of the asset value for both public and private companies. When we are selling a firm with significant IP, we often place a value on the IP as part of the sale documentation. Buyers know that the Balance Sheet is usually understated.
In a recent assignment for a non-profit (NP), we valued the IP developed by the founders and operators of the NP. The report was also used to assign a reasonable royalty rate as compensation to the founders, as a key element of an overall compensation plan.
IP VALUED BY THE MENTOR GROUP
Marketing-Related
- Trademarks, trade names
- Service marks, collective marks, certification marks
- Trade dress (unique color, shape, or package design)
- Newspaper mastheads
- Internet domain names
- Non-compete agreements
Customer-Related
- Customer lists
- Order or production backlog
- Customer contracts and related customer relationships
- Non-contractual customer relationships
Artistic-Related
- Plays, operas, ballets
- Books, magazines, newspapers, other literary works
- Musical works such as compositions, song lyrics, advertising jingles
- Video and audiovisual material, including motion pictures, music videos, television programs
- Publicity rights (persona)
Contract-Based
- Licensing, royalty, standstill agreements
- Advertising, construction, management, service or supply contracts
- Lease agreements
- Construction permits
- Franchise agreements
- Operating and broadcast rights
- Use rights such as drilling, water, air, mineral, timber cutting, and route authorities
- Servicing contracts such as mortgage servicing
- Employment contracts
Technology-Based
- Patented technology
- Computer software and mask works
- Unpatented technology
- Databases
- Trade secrets, such as secret formulas, processes, recipes