Intellectual property valuation is a complicated subject. Intellectual property valuation is hindered by the difficulty of sourcing financial information specific to the intellectual property. It is difficult (though not impossible, that is what Our Experts do) to separate the economic effects of an intellectual property from that of the company exploiting them.
Intellectual property suffers from an issue of separability. There is little doubt intellectual property generates value; however, it is generally not possible to express that value as future cash flows. How much cash flow is specifically attributable to a piece of intellectual property? An option is to rely on estimates from management. Another, which is heavily dependent on the nature of the intellectual property and availability of data, is to calculate the value of a larger collection of related property and then allocate that value.
Apportionment refers to the in which we allocate value based on some unit that drives value. For example, say you have the copyrights on a film library and needed to calculate the value of a single piece. If the value of your film library is driven by how often it is streamed, you could allocate value of this library to individual films by the relative number of streams.
Case Study #1 – The Value of a Joke
Background: Our Experts were hired by a character comedian going through a divorce. Opposing counsel argued that their characters were a marital asset that needed to be separately valued. Our Experts were hired to perform an intellectual property appraisal and to critique the work on the opposing experts. Our Client’s counsel was expecting to pay several million. We concluded the value was zero.
Our Expert argued that the characters are more than just the concept. Instead, what drove the value is the jokes being told while in character. Our Experts concluded the drivers of value were the jokes being told, and Our Team was able to isolate the value of the character at issue based on how much of the performances used that character. Plus, Our Client had the option to simply write new material not subject to the claimed joint interest.
Case Study #2 – Fancy Saltwater
Background: Our Experts were hired to critique a theft of trade secrets claim of a oil well service company. Hydraulic fracturing, more commonly known as fracking, involves pumping saltwater into wells as a clay stabilizer and to make extracting the oil easier. The Plaintiff in the case claimed that their trade secrets, their unique blend of salts to make fracking fluid, had been stolen by a former employee.
Our Experts argued that the use of salt water in fracking was well known, and therefore could not be the subject of a trade secret claim. Also, fracking can be done with just about any kind of salt, so it tends to be done with whatever is cheap and available. So while the Plaintiff’s alleged special blend of salts could be a trade secret, there was no inherent value to it because all that would be needed to get around their trade secret was to use a different cheap and readily available salt.
What should I do?
Hire an expert witness (like us). As an expert, we will save you time and money because:
- We are intimately familiar with the data sources used in the intellectual property valuations and combine this information with informed financial analysis.
- We have experience defending IP valuations in deposition and at trial. We can provide expert witnesses testimony in a simple, efficient manner so that triers of fact can understand otherwise complicated subjects.
- Our Team have performed hundreds of intellectual property valuations in hundreds of matters across every imaginable industry.