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Principles of IP Valuation

Principles of IP Valuation. Heinz Goddar Boehmert & Boehmert. IPR Valuation Methods. Cost Approach Market Approach Comparison with relevant “deals” Yield Approach. Yield Approach. Similar to employees’ invention remuneration in Germany Methods used for employees’ inventions

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Principles of IP Valuation

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  1. Principles of IP Valuation Heinz Goddar Boehmert & Boehmert - 1 -

  2. IPR Valuation Methods • Cost Approach • Market Approach • Comparison with relevant “deals” • Yield Approach - 2 -

  3. Yield Approach • Similar to employees’ invention remuneration in Germany • Methods used for employees’ inventions • License analogy • Savings • Free estimation • NPV determination similar to lump-sum invention remuneration - 3 -

  4. License Analogy • Royalty Rate • Royalty Base • NPV determination - 4 -

  5. NPV Determination • Time and extent of expected use • Life time of patent • Expected turn over • Business Plan • Pension formula for determination of NPV - 5 -

  6. “Pension Formula“ for NPV C1 C2 Cty NPV = C0 + ------- + --------- + ..... ---------- 1 + r (1 + r)2 (1 + r)ty wherein C0 is the royalty cash flow in the starting year, C1 in the first year thereafter, and so on, until Cty means the royalty stream in the terminal year of (patent) protected sales. Furthermore, r is the discount rate to be applied, i. e. the average bank interest rate for lending money to be applied, e.g. 10% interest means r = 0.1. - 6 -

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