Understanding the value of intellectual property (“IP”) is often more challenging than understanding the value of companies or their securities. Companies are relatively easy to compare with one another, their valuation models have been established for decades, and most companies are easily defined and characterized.

Intellectual property, however, has none of those characteristics. The market for intellectual property is relatively opaque, it tends to be unusual in nature, if not unique by design, and the boundaries that define an intangible asset can be vague and fluid.

As a result, many participants in IP transactions are guessing when it comes to value and licensing terms. And it’s hard to negotiate well if you don’t have an informed position on market valuations and royalty rates. Many people give up trying to attach a credible value to IP, thinking that it can’t be done. However, you don’t have to negotiate your deal in the dark. Validated models exist for the valuation of intellectual property, such as:

Market comparables - there are transactions involving the sale of intellectual property, if you know where to look and how to identify them.

Public companies - there are companies that are effectively publicly traded patent portfolios. An IP valuation expert knows how to identify these companies and use their market capitalizations to indicate those companies’ respective IP valuations.

Licensing agreement analysis - there are disclosures of the terms of intellectual property purchase and licensing agreements. One simply has to know where to look and parse the agreements for useful transaction and licensing data.

Relief from royalty model - a cousin of the discounted cash flow method that measures value as a function of the royalties that the owner doesn’t have to pay someone else, discounted for risk and the passage of time.

Excess earnings model - another cousin of the discounted cash flow method that measures value as a function of the cash flow an IP asset might generate, adjusted for the interaction of value contributed by other assets, such as trademarks or labor.

Real options - framing IP as an option to exclusively use and exploit an IP over a period of time.

Cost of reproduction - determining IP value as a function of the cost of a market participant to re-create it, if possible.

With/without - determining IP value by calculating the difference in the value of a company with ownership of the IP and without it.

By partnering with High Score Strategies, you are creating an unfair competitive advantage for yourself by virtue of having a factual basis of the value of the IP asset or market royalty rates. This puts you in the driver’s seat for negotiating your deal, increasing your chances to secure a favorable outcome.

Buying, selling, and licensing IP are risky transactions, but with the right advisor, those risks can be managed to your benefit. If you have a question about the potential value of an IP asset or terms of a licensing deal, contact us at High Score Strategies to set up a consultation.


We will respond to you as quickly as possible. Thank you so much for reaching out.

Subscribe to our newsletter