The importance of IPR valuation

To exploit your intellectual property rights to their maximum potential, you need to first understand their value. Megan Taylor outlines why rights holders need to consider IP valuation, different methods for valuation of IPR portfolios, and how to get started with IPR valuation exercises. 

Like any other form of property, intellectual property rights (IPRs) can be bought, sold and licensed. In fact, your IPRs are likely to be the most valuable intangible assets your business owns. Therefore, it is essential to understand their worth to ensure you are exploiting those rights to their maximum potential.   

Which rights should be covered in IPR valuation exercises? 

There are many types of IPRs and, depending on the nature of your business, you might not have all of these. The following list includes various types of IPRs that a business may have:  

• Trademarks  
• Designs  
• Copyright  
• Patents  
• Trade secrets  
• Domain names  

It is important to ensure that you have protection for all relevant forms of IPRs for your business. If you think there could be gaps in your IP protection, you can identify them with an audit. If you would like to discuss how to maximise your IP protection with one of our advisers, please contact us.   

Why valuation of IPR is important 

Once you have established your IPRs, you can then consider the value each of them holds. There are many instances where it is important to know the value of your IPRs, including: 

• Selling your IPRs (including partial sales) 
• Licensing your IPRs 
• When seeking financial loans (as the IPR can be used as security)  
• If your business is merging or being acquired  
• If your business is being liquidated and you wish to obtain the rights from the liquidators 

Not knowing the value of your IPRs when completing these transactions could result in a loss due to the investment you have made into creating and developing the IPRs.  

It is no surprise that the biggest brands in the UK are valued at billions. In 2024, the UK’s most valuable brand was Shell, which is estimated to be worth £50 billion. 

How to value your IPR  

There is no set way to value your IPR. Instead, the UKIPO suggests three ways in which the value can be assessed:  

1. The cost method  

This method looks at how much you have spent creating and developing the IPR and can include costs from the very start of creating a IPR up to its registration. Costs to be considered include:  

• The labour included in creating the IPR  
• Materials and equipment involved in the creation of the IPR  
• Any research undertaken before creating the IPR  
• Any testing of the IPR  
• Costs involved in obtaining registration of the IPR  
• Overheads of the staff involved in the creation of the IPR  

The rationale behind this method is that a party seeking to purchase your IPR would have incurred this expense if they were to create the IPR themselves. Therefore, this is often the lowest value figure, compared to the other two methods.  

2. The market value method 

This method looks at the value of your IPR in the marketplace to assess what people would pay for your IPR. This involves looking at other transactions for similar IPRs to estimate value. These can involve sales or licenses.   

The biggest difficulty with this is that IPRs by their very nature are supposed to be distinctive and therefore unique, so comparisons are likely to be very broad and not truly reflect the value of your IPRs. 

3. The income/economic benefit method  

This method assesses the value of IPRs based on the revenue they generate for your business, by looking at the income generated and the cost of generating that income.   

During the assessment, other factors such as risk and financial costs are included, as well as inflation. The overall figure when assessed against depreciation is referred to as the ‘Net Present Value’ (NPV).   

It is important to remember that this may require a hypothetical assessment rather than one based on true figures, meaning that you should consider other factors that could cause any changes in the market and apply a “risk” factor to take into account the uncertainty in the figures.   

-->Ultimately, the value of intellectual property (like any other asset) is very subjective, and these three measures may only be a starting point. IPRs may provide a key to unlock many commercial opportunities for the acquirer and so may represent a commercial advantage far beyond any licensing income the present owner may receive or the acquisition cost of the asset. 

How do I protect the value of my mark? 

To maintain, or even enhance, the value of your mark, there are various steps to take, including:   

• Registering your IPR (this is not possible for copyright in jurisdictions such as the UK) – making sure that it is protected for goods and/or services currently in use and those that you look to expand into in the near future,  
• Ensuring the IPR is used consistently in relation to the goods and services for which it is protected,  
• Keeping records of such use (these should clearly indicate the particular IPR for the goods and/or services it protects and should be dated),  

These steps will ensure that your rights remain valid and enforceable, ensuring that the value is retained.   

If you would like assistance to undertake an IPR valuation or for further insights on why and how to conduct IP valuation exercises, contact us to speak to one of our advisers. 

Megan Taylor is a Trainee Trademark Attorney at Novagraaf in the UK.