Amir Khoury Why Value Ip Oct 2007 Sent
- 1. Queen Rania Center for Entrepreneurship (QRCE) Technology Commercialization Program The 3rd Conference on Technology Commercialization Why Value Your Intellectual Property? Dr. Amir H. Khoury Amman, October, 2007
- 2. “ There is Gold in the Garden!”
- 3. To Value….. a natural need! Natural tendency of people to want to know what they own; how much they are “worth”: Personal curiosity. Social prestige.
- 4. On a deeper level…. More compelling rationales why valuating IP constitutes crucial component in contemporary commercial dealings.
- 5. Summary of Rationales Utilizing Legal Protection Dictations of Corporate Structure Business Indicator Credit Leverage Tax Benefits: Amortization of Depreciating IP
- 6. 1. Utilizing Legal Protection Effectively The Law: Creates “property” concept; provides rules/methods for protecting it. Property includes tangible & intangible assets (i.e. IP). Intervenes when property rights are infringed. Provides host of remedies for property holder (compensation; restitution). In order to utilize legal protection there is a need to: Determine extent of “harm” inflicted on property owner. Need clear understanding of IP value.
- 7. 2. Dictations of Corporate Structure Most commercial dealings conducted by corporations. Corporations have a broad base of investors (shareholders). Shareholders: a versatile group; buys/sells assets; maneuvers between corporations looking to maximize earnings.
- 8. … Valuation of Corporation’s IP (placing it on balance sheet): Constitutes “Promise” about corporation’s value. Shareholders advised re corporation’s value. Exposes hidden assets; corporation rendered a more attractive investment. IP generated added-value raises share prices (value); generates earning for corporations/ shareholders.
- 9. 3. Business (Compass) Indicator Management keen to: Boost financial success. Improve performance. IP assets of business provide strong indication of Management’s overall performance: (e.g. Valuable brand = Goodwill of business). Business’s brand --- worth more than total tangible assets. “ pending” patents/copyrighted works ---- promises of great commercial success.
- 10. 4. Intellectual Property as a Credit Leverage Corporations need wealth/capital to expand. Funds not always available: Need to borrow. Lenders (i.e. banks/financial institutions) require security against loan (mortgage; floating charge; legal lien on land/assets -- including IP assets.
- 11. … .Credit Leverage Company holding intangible assets of value: More likely to receive loans. Loans on more favorable terms: Enabling borrower to expand operations/raise earnings.
- 12. 5. Tax Benefits: Amortization of Depreciating IP Prevalent in IP with limited term (Patents: 20 years patents; Copyrights: 70 years after creator’s death). Value of Patent/Copyrighted work falls each year: nears entry to “public domain”. From right holder’s perspective --- value nears zero.
- 13. …Amortization Amortization of estimated useful life of patent/copyrighted work: “business expense”-- not applicable to goodwill (duration not limited in time). Declining value of patent/copyrighted work can be used to offset earnings – Constitutes clear tax benefit.
- 14. Conclusion Dominance of IP assets in commerce & industry prompts recognition for its value. IP valuation merely states the obvious: Great value attaches to IP assets. Valuating (appraising) IP is taking the world by storm. Prediction: “Valuating Intellectual Property” to become “standard procedure” for accountants; business people; lawyers.
- 15. So…why value IP? … Why not?
- 16. Thank you! Amir H. Khoury