F.9 This is a very complicated area, and appropriate advisers may need to be involved to (a) value, where feasible, the public sector body's IPR contribution, and where not, to give as good an idea as possible of the worth of the IPR; or (b) structure the to ensure that the public sector obtains the appropriate value for its IPR contribution.
F.10 Three common methods for the valuation of IPRs are the Cost Approach, the Market Approach and the Net Present Value or Income Approach. Each of these methods is described in further detail in the table F.2 below.
| The Cost Approach | The Market Approach | The Net Present Value (NPV) or Income Approach |
Method of valuation | Assumes that there is a correlation between commercial value of intellectual property and the cost of its research and development (R&D), taking into account the costs of R&D, promotion, and depreciation/ appreciation. | Arrives at a market price for the intellectual property in question, based on comparable IPR currently or recently transferred in the open market. | Estimates the economic benefit that might derive from the IP during the protection period, less the input costs and other quantifiable calculated risks. |
Pros | Very simple to calculate. | In theory, relatively easy to calculate provided that a suitable comparator exists. | Closest method to reflecting true potential of certain IPRs, notably patents. Can adapt to the amount of protection offered by different forms of IPR protection. |
Cons | The commercial value of IPR does not necessarily correlate with the input costs. For example, a trademark may cost almost nothing to create but have huge consumer recognition and be extremely valuable. | There is often no suitable comparator available because of the unique nature of IPR. Further, details of valuations used are very rarely made public. | Complex calculation. Requires considerable background data Produces subjective valuation. |
Likely to be suitable for | copyright, design right (registered or unregistered). | trademarks (because generally more comparators), copyright (but only if a reasonable comparable is available). | patents (most suitable approach), trademarks. |