Intellectual Property: Valuation, Exploitation, and Infringement Damages

THE REVISED AND UPDATED COMPREHENSIVE GUIDE TO INTELLECTUAL PROPERTY

The thoroughly revised fifth edition of Intellectual Property offers an accessible guide that simplifies the process of attaching a dollar value to a wide variety of intellectual properties and intangible assets such as patents, trademarks, copyrights, trade secrets, favorable contracts, licenses, and joint ventures. Comprehensive in scope, the text explores the relationship between intellectual property and intangible assets and the business enterprise in which they are exploited. This new book contains the tools needed for evaluating the investment aspects of licensing and joint venture decisions and the author discusses the legal, tax, and accounting practices and procedures related to such arrangements. In addition, the book provides analytical models that can be used to determine reasonable royalty rates for licensing, equity splits in joint venture arrangements and intellectual property infringement damages.

The updated fifth edition contains information on the most recent thinking in the field and includes real world examples that clearly illustrate theoretical topics. The book′s hypothetical case studies cover many of the nuances of valuation, licensing, and damages analysis. Most of the chapters in this book have been revised to reflect the accelerating importance of intellectual property for value creation. The text is designed to make the information easier to access by defining four major sections: Introduction, Valuation, Exploitation, and Infringement Damages.

In today′s marketplace 85% of the value of major corporations of all types is comprised of intellectual property and intangible assets. The updated fifth edition addresses the fact that intellectual property has become a critical factor to business decision–making. Quantifying the value of intellectual property is fundamental to activities such as licensing, acquisitions, joint ventures, divestitures, restructurings, and acquisitions.

About the Author xi

Preface xiii

Acknowledgments xvii

PARTI INTRODUCTION 1

1 Intellectual Property Is the Foundation of Value 3

2 Intellectual Properties Defined 20

3 Intangible Assets Defined 40

4 Business Enterprise 54

PART II VALUATION 65

5 Valuation Principles 67

6 Cost Approach 75

7 Market Approach 87

8 Income Approach, Identifying Economic Benefit 95

9 Risk–Adjusted Income 113

10 Valuation Errors 130

11 Early–Stage Technology Valuation 142

12 Special Valuation Situations 155

PART III EXPLOITATION 175

13 Exploitation Strategies 177

14 More on Exploitation Strategies 187

15 Licensing, Negotiations, and Agreements 213

16 Royalty Rates for Licensing 237

17 Use of the 25% Rule in Valuing Intellectual Property 272

18 Determining a Royalty Rate an Example 291

19 The Magnitude and Meaning of Royalty Misreporting 305

20 Patent Aggregators 313

21 University Licensing 326

22 Joint Ventures 338

23 Intellectual Property Audit and Management 352

24 Organizing for the Future 372

25 Transfer Pricing 384

PART IV INFRINGEMENT DAMAGES 401

26 Lost Profits 403

27 The Entire Market Value Rule 434

28 Royalty Rates and the Georgia–Pacific Factors 448

29 Evolving Patent Damages 471

30 Trademark, Copyright, and Trade Secret Damages 484

Appendix A Accounting 496

Appendix B Economic Benefit, Timing, and Pattern 507

Appendix C Royalty Rate Data 530

Appendix D Risk and Uncertainty 598

Index 619

RUSSELL L. PARR, CFA, ASA, is President of Intellectual Property Research Associates (www.ipresearch.com). He is an expert in determining the value of intellectual property. Mr. Parr′s books about intellectual property value and management are published in Japanese, Korean, Italian, and English. He is dedicated to the development of comprehensive methods for accurately defining the value of intellectual property.