Value and Intangibles – the Value Problem

First, Page Seager IP wishes everyone all the best for the new year, no doubt a year of new milestones and challenges in the world of strategic IP.

We have a number of topics planned for the coming months.   Many of these will address IP issues that we are encountering in the world of information technology.   Before we do that, however, we thought we’d spend some time in January looking at some broader questions affecting the world of strategic IP.

This is the first of a number of posts that will explore a difficult question.   How does one allocate value to intellectual assets?   Intellectual asset managers around the world have been seeking a satisfactory answer to this question for some time – it is something of the Holy Grail in the world of managing intangibles.   If a firm, objective indicator of value could be applied to most IP portfolios (many of which consist of intellectual assets that are a work in progress), this would revolutionise the intellectual manager’s role.   At the very least, the task of convincing boards, potential investors and other stakeholders to commit themselves would be far less of a challenge.

The irony is that this value problem occurs because of one of the key strengths attributable to intellectual assets.   What we’re alluding to here is the simple fact that each intellectual asset is unique.   These assets are generally developed out of a need to innovate to deal with a unique set of problems, hurdles and challenges.   They are usually most valuable to the party that develops them.   In most cases, to understand what an intellectual asset is worth, you have to understand the gaps that asset has been designed to bridge.   To that extent, it is difficult to ascribe an objective market price tag.   This is the case even if, in the final analysis, that price tag is significantly higher than first expected.

Over the coming weeks (and perhaps well beyond that, no doubt), we will be taking a careful look at intangibles and value.   We will examine a number of approaches to dealing with it, including:

1.       Attribution of value using accounting and economic methodology

2.       Attribution of value through the use of strategic structures

3.       Attribution of value using transactional constructs

Of course, none of these currently present themselves as the final answer to the value problem - they are attempts rather than absolute solutions.   Many of our readers and contributors will have encountered methodologies in the first two categories.   The third is something of an anathema because as far as we are aware, it hasn’t been tested.   However, it’s worth taking a look at it because of its lateral approach.

As always, we look forward to your comments, feedback and interaction.