Intellectual Property Valuation and Royalty ... - Brand Finance
Intellectual Property Valuation and Royalty ... - Brand Finance
Intellectual Property Valuation and Royalty ... - Brand Finance
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Diagram 3: Value Mapp<br />
‐ Grouping IP P by Function <strong>and</strong> Gauging Importance<br />
When evaluating the earnin ngs generaated<br />
by IP in its cur rrent use, it is neces ssary to<br />
disaggreegate<br />
the eearnings<br />
of the t enterprrise.<br />
For the e purpose of o determinning<br />
the ear rnings of<br />
the IP tto<br />
anotherr<br />
owner, it is necessaary<br />
to estim mate the in ncremental earnings that t the<br />
propertty<br />
will generrate.<br />
3. Royyalty<br />
Ratee<br />
Determination<br />
<strong>Royalty</strong> payments are a prof fit sharing mechanism m. Parties to o a licensee<br />
are free to t select<br />
whateveer<br />
basis of royalty calculation<br />
thaat<br />
meets th heir comme ercial requirements.<br />
The<br />
most<br />
common<br />
method is<br />
the expression<br />
of thee<br />
royalty as a percenta age of revennue,<br />
other methods<br />
m<br />
include: :<br />
� A sinngle<br />
up‐fronnt<br />
payment t.<br />
� A prre‐determinned<br />
amount t that is paidd<br />
periodically,<br />
similar to t a propertty<br />
rental.<br />
� A chharge<br />
basedd<br />
on units of f manufactuure<br />
or sales s.<br />
� For early stage technology y, royalties ccan<br />
be base ed on development<br />
cossts.<br />
‐ 7 ‐<br />
Soource:<br />
Br<strong>and</strong> <strong>Finance</strong> F plc<br />
© Wolters KKluwer<br />
Law & Business
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