IPwe’s Valuation Methodology

IPwe’s AI-Based Valuation Methodology

In contrast to other economic goods, patents have 3 peculiarities that make their evaluation and valuation challenging, that IPwe’s Valuation Methodology takes into account:

   1. Patents are unique

   2. Patents are created deliberately abstract

   3. Patents are territorially limited

Patent valuations have 3 dogmatic groups:

   1. Market-based approach

   2. Cost-based approach

  3. Income—based approach*

Smart Intangible Asset Management’s Valuation Methodology

IPwe’s Smart Intangible Asset Management solution utilises an income-based valuation approach. The different established valuation approaches vary largely in their angle of assessment, the key metrics that they’re based on, and the amount of data that needs to be provided by the asset owner. This leads to a drastic variation in results.

Our Patent Valuation Model integrates patent and financial data from multiple data sources in a relief from royalty model**. By automatically feeding the model and applying a uniform qualitative standard of assessment to all valued patents, it eliminates the inherent subjectivity associated with income-based valuations.

IPwe’s core innovation comes from pre-aggregating cleaned and normalised data in the model so that the only input parameter required to carry out the valuation is the target patent number. This results in a previously unattainable level of accuracy in valuation for a process that usually takes significant time and triggers high discovery costs.

Our algorithm carries out the following steps automatically to obtain a sophisticated economic valuation of the target patent:

1) Extracting input data (CPC codes etc…)
2) Market mapping
3) Qualitative analysis of the target patent and the whole peer group in the market 4) Calculating the remaining useful life
5) Forecasting of attributable revenue and annual growth
6) Determining risk-adjusted discount rate
7) Determining applicable royalty rate
8) Determining pre- and after-tax royalty savings
9) Output: DCFA of royalty savings over the remaining useful life

IPwe’s Valuation Methodology provides a new perspective on intangible assets that are rarely valued at scale. To gain a more in-depth insight into the mechanics of our valuation, a detailed published review can be downloaded here.

* Income-based approach: Value an asset based on the past, current, or expected cash flows of the asset.
** Relief from Royalty Model: Calculate value based on the hypothetical royalty payments that would be saved by owning the asset rather than licensing it.