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STUDENTS HANDBOOK - Valuation Of Intellectual Property
The Valuation Of Intellectual Property
“If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trade marks, and I would fare better than you.” — John Stuart, Chairman of Quaker (ca. 1900)
Intellectual Property (IP) in the form of patentable technology, legally protectable trademarks and designs, copyright and others have increasingly become the most important assets, not only for many of the worlds largest companies, but also for small and medium enterprises. Observe Table 1. indicating how important role just branding and their respective trademarks play in the strategic building of shareholder value even in case of larger multinational companies. In case of capital weak start-up companies the importance of intellectual property and its share of the overall company asset is even more significant.
Often, an organisation’s sole asset is their IP.
Table 1..: The contribution of brands to shareholder value
|Example: The president of the well-known Coca-Cola company was asked on the value of the company’s intangible assets. The answer stated that if each building, factory, office, car, truck owned would burn down in a moment, the company could get back to operational re-building and buying everything lost in 1 year due to the value and profit generated by its intellectual property, namely the income generated by its trademarks, franchise contracts, patents, licences, etc.|
(Source: Best Global Brands 2007, Interbrand)
This growing role of IP based assets in generating new value poses a number of major challenges for the corporate sector, governments and the society at large: how to evaluate the value and contribution of IP and how to maximise its potential?