After reading Jackie Hutter’s (author of the IP Asset Maximizer Blog, a great read) comment under Joff Wild’s post on IAM, I hastily posted a response (comment #15).  Subsequently, I read some other responses, and after giving Jackie’s words some more thought, I slightly digress from my initial response.
I still believe transparency is the key to standardizing IP valuation.  However, when I speak of such valuation, I do so in the transactional context.  Jackie’s words, “valuation of intangible assets primarily by what a willing buyer would pay on the open market pre-supposes that corporate intangibles derive value only from their transactional value,” are true.  There really is more “value” than a price tag placed on IP in the buy/sell context.  As she points out correctly, that value is derived from “the market share improvements associated with brand name recognition and high corporate reputation.”  In this light, a company derives substantial worth from strategic preservation of some IP, especially that which is core to a corporation’s operations.  This IP brings value to the table that cannot, and will not, be measurable by any derivative measurement, rating system, or scientific formula.
When I speak of transparency and its crucial importance to the burgeoning IP market, I do so from an investment perspective.  However, as a corporate M&A attorney, I cannot forget the inherent corporate value resulting from the competitive advantage on which a company can capitalize by efficiently using (instead of licensing or selling) certain IP.

Therefore, from the IP valuation lens, we should be aware that IP has more than one “value”, and therefore more than one valuation method.  It might be easiest if the IP community begins to differentiate the two by using “value” for the transactional context and “worth” for the corporate context.

This entry was posted on Wednesday, January 28th, 2009 at 1:22 pm.
Categories: Burgeoning Business, Investment Intelligence, Portfolio Potential ~ by Ian McClure.

5 Comments, Comment or Ping

  1. Ian: I am cross posting this response to your comment on my blog.

    I am so glad you chimed in. I read your comment on the IAM blog the other day and was going to dash off a response, but then I realized that our positions appeared so wildly divergent that there was little point. I am happy to see that we are closer in opinion than it first seemed.

    Also, you have read my mind–I have given much thought to the transparency issue, in particular as a result of your somewhat strong disagreement with me. In considering the thread on the IAM blog, I have now realized that there seems to be (at least) 2 camps (or interests) in the area of IP valuation.

    On one side, for that type of IP that actually derives value from its transactional value, transparency is absolutely necessary. On the other end is that IP that derives its value from the business value to the company that owns it. The former derives value from the market, the latter from the business benefit it provides to its owner. (I am sure there is an economic model for this, but I am not studied in the formalities of economics.)

    The existence these different classes means that there must be 2 different methods to value IP. I could go on and on, but I will save further discussion for an upcoming blog post.

    Again, thanks for reaching out, and I look forward to continuing to connect.

  2. Thanks Jackie. It is an interesting perspective, and either side is easily overlooked depending on which camp a person comes from. I look forward to discussing the issue IP Valuation and the “dual camp” scenario with you more. I am sure that I will touch on it again in a future post. I look forward to continuing the conversation at that time!

Reply to “IP Valuation: But in which context?”