Is IP valuation ready for prime time?

IP Value Wire interviewed an investment banker-type last month who was looking to take his firm more into IP valuation as it relates to M&A, trying to take advantage of the fact that IP has become a “new asset class,” according to the New York Times. He was having trouble.

Old-schoolers in the firm weren’t seeing the prospects.  Valuing IP is not like valuing a business, nor like valuing other assets.  At a conference on valuing IP sponsored by BVR, Ron Laurie, of Inflexion Point Strategy, singled out timing, competition, and legal developments as all having an effect on IP value, comparing IP valuation to a spot market for a commodity. It’s difficult to grasp.

Going one step further in recent a New York Times article, Kevin Rivette, of 3LP Advisors, stated the difficulty is that patents are much more than an asset class, they are a strategic tool, the competitive value of which might be difficult estimate.

Ken Jarboe, of the Athena Alliance, simply thinks we are not there yet, that sadly, we are a long way from having in place the economic and policy infrastructure needed for IP assets to truly play a major role, calling for regularizing “both the trading process and the valuation standards” for IP.

To be sure, valuation analysts who are able to tackle IP valuations are in demand.  An associate provost of a major Texas University recently proclaimed, “all we do with respect to faculty-developed technology hinges on its value … we start with value.” Valuation for informing faculty researchers or preparing for industry negotiations does not require the same precision as valuation for business-valuation purposes, but it does require the same fundamental constructs and professional judgment, as does valuation for M&A purposes.  Business Valuation Resources continues to be the primary source for tools to assist practitioners in this complex area.