6. The Impact of IP Risk in the Development of IP Markets

According to Knight (1921) risk applies to situations where we do not know the outcome of a given situation, but can accurately measure the odds. Uncertainty, on the other hand, applies to situations where we cannot know all the information we need to set accurate odds in the first place.

See Sect. 7.4 below.

Section 1.4 above.

These are the most conventional valuation methods; yet, valuing intellectual assets may be harder than it looks. Anson (2015) gives us a list of 25 alternative methods. Some commentators identify almost 30 different methods of value assessment – a fact that highlights the level of methodological imprecision surrounding this area. Let us highlight a few of these. For instance, the “Brand Contribution” measures the contribution of the brand, as opposed to other elements of the business profit. The “Replacement Cost” calculates how much money we need to develop a substitute for the IP with the same functionality. The “Reproduction Cost” measures the aggregate costs necessary to produce an exact duplicate. The “Technology Factor” measures a technology’s contribution to a business’ total revenue; it calculates a net present value and then is multiplied by an associated risk factor (the “technology factor”). The “Venture Capital Method” analyzes the value of future cash flows over an asset’s life. It employs a fixed, non-market-based discount rate (generally, a rate of between 40 and 60%), and it makes no adjustments to account for the probability of success (e.g., a patent’s success). Finally, the “Liquidation Value Method” measures the liquidation value for any piece of IP, which is the lowest price that the asset is virtually guaranteed to obtain in a distressed situation.

Sometimes, though, there are still valuation methods that entrepreneurs can apply. In April 2015, Kolon Industries Inc. paid $275 million in restitution to Dupont Co. to settle the litigation involving the theft of their trade secrets relating to Kevlar bulletproof vests.

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