© 2009 CONSOR© 2009 CONSOR 11

What Is Your Intellectual Property Worth?

Methods for Determining Value

Presented by:Weston Anson

CONSOR Intellectual Asset Management800.454.9091 www.consor.com

25th National CLE ConferenceVail, Colorado

January 5, 2008

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Understanding IP Value - Why Value?

Transaction due diligence ROI assessment Impairment testing

Litigation Transfer pricing Use as collateral Bankruptcy

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Marketing Bundle

Primary trademark Corporate name and logo Marketing umbrella Sub-brand names Core brand Copyrights

Secondary trademarks Packaging design and

copyrights Trade dress Characters

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Technical Bundle

Key patents Trade secrets Formulae Packaging technology and

sources Shapes and sizes Process technology

Design technology Proprietary test results Plant and production design Product specifications Operating platforms

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IT Bundle

Platform Software Data Warehouses Software Licenses Source Code Databases

E-Commerce Sites Credit/Payment Systems Shrink Wrap Software Contracts Mask Works Data Mining Devices

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Context of the ValuationIP Value is Context Specific:

Brand/TM

Patent/TechnicalIT/Software

Joint Venture or Sale

Litigation

Internal Development

Licensing External

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Other Context Parameters

Time specific parameters Current value - The value of the assets as they are currently

employed Potential value - The value of the assets resulting from a new

endeavor Historical value - The value of the assets at a certain point in the

past

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IP Valuation Tools and Methodologies

Traditional Methodologies Market Approach Cost Approach Income Approach

Proprietary Methodologies VALMATRIX® VALCALC® BVEQ™

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Lost Profits Disgorgement of Profits Reasonable Royalties Loss in Business Value

Economic Damages

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Economic Damages

Damages Assessment 1

Plaintiff’s burden is to prove Defendant’s revenues stemming from the alleged infringement

Defendant must identify all expenses associated with the alleged infringing sales activity

Profit Calculation The court allows for a deduction of a portion of the defendant’s general expenses,

such as overhead, operating expenses, and federal income taxes. This approach of interpreting “profits” is recognized in the Second, Fourth, and Ninth Circuits 2

1 15 U.S.C.§ 1117(a) Lanham Act.2 Litigation Support Handbook, Russell Parr, p.192.

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Case Study #1

After-market parts supplier

Litigation

Lost profits Disgorgement of profits Loss in business value Reasonable royalties

Copyright infringement

Revenue projections Discounted cash flows

Income Approach

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

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Case Study #1 (cont.)

$ 25,000NAAlternative reasonable royalties

$ 450,000$ 45,000,000TOTAL DAMAGES

150,00020,000,000Loss in business value

NA10,000,000Lost profits

$ 300,000$ 15,000,000Disgorgement of profits

RebuttalPlaintiffCategory

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Case Study #2

Food Manufacturer

Litigation

Lost royalty income

Brand valuation

Trademark infringement

Revenue projections

Discounted cash flows

Income Approach

Relief from Royalty

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

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Case Study #2 (cont.)

$ 35,000,000

$ 38,250,000

4.5%

$ 850,000,000

Retail Food

$ 185,000,000$ 50,000,000 BRAND VALUATION

$ 52,875,000$ 14,625,000LOST ROYALTIES

NA1.5%Royalty rate

$1,825,000,000$ 975,000,000Infringing sales

TotalFoodserviceCategory

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Case Study #3

Auto parts manufacturer

Litigation

Lost profits

Reasonable royalties

Breach of contract

Trademark infringement

Revenue projections

Discounted cash flows

Income Approach

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

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Case Study #3 (cont.)

$ 1,415,000

635,0000

$ 360,000420,000

Plaintiff

$ 695,000

1,250,000(1,310,000)

$ 540,000215,000

Rebuttal

$ 720,000TOTAL DAMAGES

(615,0001,310,000

Unjust enrichment (post- termination)

Less: mitigation

$ (180,000)205,000

Breach of contract

Counterfeit units

Lost Profits:

VarianceCategory

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Case Study #4

Conglomerate

Litigation

Valuation of stock distribution

Valuation of dividend income

Valuation of payments

Valuation of retirement benefits

Trademark infringement (Celebrity)

Discounted cash flows

Income Approach

Enterprise Valuation

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

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Case Study #4 (cont.)

10,000,000Retirement benefits

$ 325,000,000TOTAL VALUE

85,000,000Dividend income

30,000,000Payments

$ 200,000,000 Stock distribution

Estimated ValueCategory

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IP Valhalla

Brands

Oldsmobile Blatz Commodore Eastern Airlines

Technology

5 ½ Floppy Disks 8 Track Cartridges Analog Cell Phones IBM Selectric

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