The IP valuation of a company’s assets is a study based on law, economics, finance, accounting, and investment at a particular point in time, which requires expertise on technical matters, intellectual property, marketing, finance and strategy. IP valuation is a process which aims to collect important information in order to determine the actual monetary value of particular intellectual property assets as well as the future economic benefits that they will bring.

An accurate assessment of the value of intellectual property can be very useful in the business environment to facilitate management decisions related to effective development and marketing of products. Therefore, the following aspects can be considered by businesses as incentives to conduct an intellectual property valuation:

  • valuing intellectual property facilitates investment in industry, making business more attractive and more viable to potential investors and shareholders; 
  • IP valuation facilitates the commercialisation and transactions of intellectual property rights; for example  the assessment of the value of the intellectual property can be used  before and in the process of negotiating the terms of a transfer, licence and franchising of intellectual property rights;
  • IP valuation will also be useful when determining investment strategies, in particular establishing a new enterprise, merging of legal entities or setting up joint ventures;
  • a thorough understanding of the value of the IP assets ensures more informed negotiation and allows the determination of fair royalty rates; and
  • IP valuation can provide the management with the information needed to ensure optimal conditions for the exploitation of the IP asset, which fits within the business strategy of a company.

IP valuation can also help to choose a strategy to be used in case of intellectual property disputes when deciding whether to introduce a court action or to opt for alternative dispute resolution mechanisms such as mediation or arbitration. 

Assessing the economic value of intellectual property is often used in research and development management and marketing analyses.