Suppose you own a piece of intellectual property (IP): a patent, a copyright, a trademark, a trade secret. How do you attach a monetary value to it? How much is it worth?
“That’s an issue we face almost daily, whether we’re doing litigation or mergers and acquisitions,” says attorney Mark Privratsky, who chairs the intellectual property practice group for Minneapolis law firm Lindquist & Vennum. “Am I getting enough for my IP or paying too much for someone else’s? Everybody is trying to figure that out.”
The question can arise in many circumstances: One party buys a patent or copyright from another. One company buys another company, along with its portfolio of intellectual property. Your firm wants a bank to accept some IP as collateral for a loan. You intend to license your patent to someone else. You sue someone for infringing your patent.
What is the IP worth? As with most goods, Twin Cities patent attorneys say, the one truly reliable answer is, whatever a buyer is willing to pay. But with intellectual property, even an estimate of what might constitute a reasonable ballpark price is almost entirely in the eye of the beholder.
The problem is especially acute for what intellectual property attorney David Axtell, of the Leonard Street and Deinard law firm in Minneapolis, calls “dormant” IP—a patent, say, “that you happen to have in a drawer, that’s not an integral part of your business, that you haven’t asserted against anybody,” and that may have never brought in money.
Things get easier if, for example, someone has paid you for a license to use a patent. “Then you have a revenue stream. You have a market on which to base a value,” Axtell says. “But unless you’ve got an income stream, IP valuation is a whole lot of smoke and mirrors. It’s guesswork. It’s a black box.”
