Early-stage companies have generated a huge amount of litigation, and this is particularly true for start-ups focusing on intellectual property. The value of these untested assets is subject to huge dispute. That's why a new North Carolina case is so critical, and the decision in the statutory buy-out case hinged on the testimony and methods of one court appointed expert, Mike Pellegrino.
“Pellegrino has been recognized as one of the world’s leading experts in intellectual property valuation,” the court said, in Vernon v. Cuomo, 06CVS8416 (N.C. Super. Ct., March 15, 2010). His valuation report “set forth clearly and in layman’s terms the factors, limitations, assumptions, and methodologies used to determine fair value.” Pellegrino also used statistical models (simulation algorithms and Monte Carlo simulations) to calculate fair value based on discounted future income. His approach was “appropriate for this type of business and clearly in the mainstream of IP valuation methodologies,” the court concluded.
The court’s decision validates the analysis methods that Pellegrino discusses at length in BVR’s Guide to Intellectual Property Valuation, in particular, the challenges of understanding the factors specific to the IP and also its value proposition, including estimating market share and adoption, taxes, risk, patent regulation and protections, operating budgets and capital requirements.