Last week BVR attended an intense two-day, roll-up-your-sleeves workshop on valuing intellectual property in early stage companies. Management Roundtable was our host; Mike Pellegrino was our instructor. The audience was diverse, from manufacturers, service companies, health care institutions, research centers, academia and others. We will describe the workshop materials and presentation to give readers some useful IP valuation concepts over the next week or so.
Along with Patents, Trademarks, Trade Secrets, and Copyrights, interestingly Mike includes Right of Publicity as a key IP to be valued (understandably, given Mike's headquarters location and the strong Indiana law).
Why do we value IP? There are legal events that require valuations: bankruptcy (see our blog about New York’s Tavern on the Green), taxation (transfer pricing and estates), mergers and acquisitions, financing and legal damages (for infringement). The high-level, IP-executive-type attendees, however, required prospective valuation information. They have ideas that need valuing; they have budgets that need allocating.
The costs of not valuing IP, misunderstanding an organization’s IP, or valuing IP incorrectly are large, sometimes catastrophic. Companies continue to invest in ideas that warrant early abandonment. (Mike convincingly presented a mathematical case against electric vehicles and biologic fuels. “Without massive subsidies, they’re toast. They are on an unsustainable plane.”) Many companies abandon ideas that have merit. Unfortunately, money spent on projects that will fail is unrecoverable, and, importantly, represents money not spent on ideas that would have been workable. Good, timely, prospective valuation of IP is the path to good decision-making.
Tomorrow we look at how IP gets its value and specific challenges inherited in prospective IP valuations.
Online and hard copy versions of BVR’s Guide to Intellectual Property Valuation, by Mike Pellegrino, are found here.