Valuing Innovation

Intellectual capital is recognized as the most important asset of many of the world’s largest and most powerful companies; it is the foundation for the market dominance and continuing profitability of leading corporations. It is often the key objective in mergers and acquisitions and knowledgeable companies are increasingly using licensing routes to transfer these assets to low tax jurisdictions.

Nevertheless, the role of intellectual property rights ( IPRs) and intangible assets in business is insufficiently understood.  Accounting standards are generally not helpful in representing the worth of IPRs in company accounts and IPRs are often under-valued, under-managed or under-exploited.  Despite the importance and complexity of IPRs, there is generally little co-ordination between the different professionals dealing with an organization’s IPR.  For a better understanding of the IPRs of a company, some of the questions to be answered should often be:

  • What are the IPRs used in the business?
  • What is their value (and hence level of risk)?
  • Who owns it (could I sue or could someone sue me)?
  • How may it be better exploited (e.g. licensing in or out of technology)?
  • At what level do I need to insure the IPR risk?