Intellectual assets in its various forms (such as patents, copyrights, trademarks, trade secrets, and know-how) can contribute greatly to a company’s bottom line. In many business circumstances, it is essential to explicitly identify and record the value of such assets. Such circumstances arise in the context of a transaction such as sale/purchase, license/cross license, merger, acquisition, or internal corporate transfer. Other times, internal reporting requirements such as equity financing, tax planning and compliance, or charitable giving, makes the precise valuation of intellectual assets necessary. The subject is covered in more detail in Chapter 25, but an introduction is provided here.

A variety of quantitative and qualitative tools are helpful in evaluating intellectual assets.  All valuation exercises should however be undertaken with the knowledge that the value of the intellectual assets emanates from excess benefits it affords the user.

Valuation depends on a sound understanding of the goals of both the owner and user of the intellectual assets. Appropriate valuation tools can approximate the true worth of the asset. In general three types of valuation tools are used to value any type of asset, including intellectual property assets.  The goal of any valuation is for the parties to find a mutually agreeable way to determine and share the enhanced benefits from the intellectual asset. The owner of the technologies entitled to compensation for the portion of the benefits of the invention that are due to the intellectual property. The purchaser is entitled to retain certain benefits derived from the other attributes of the product or process incorporating the technology at issue. The purchaser should also be compensated for assuming the business risks associated with the manufacturing, using, or selling the product embodies a particular technology