Autumn 2009


Focus On Intellectual Property Valuation and Economic Analysis

Editor for This Issue: Robert P. Schweihs
Intellectual Property Litigation Insights

Thought Leadership Article:
The Sport of Kings: Promise and Perils of 21st Century Patent Litigation
Scott D. Eads, Esq., and Julia E. Markley, Esq.
The 20-year period of exclusivity that comes with a patent grant creates a powerful economic incentive for innovation. It also creates an incentive to protect those valuable patented products and processes from infringement. But the high costs and unusual complexity of the U.S. patent enforcement system have earned the system the nickname "the Sport of Kings." This discussion considers key features of the current patent enforcement system in the U.S. and discusses recent rebalancing efforts by the federal courts to rein in perceived abuses. The authors express the view that some of these changes may have the unwanted side effect of dampening incentives for innovation by unnecessarily limiting the value of patent protection.

Best Practices Article:
Combating Counterfeiting in an Electronic Era
Camille M. Miller, Esq., and Jennie A. Taylor, Esq.
TThe prominence of the Internet in today's culture and the continually evolving online capabilities are providing more opportunity for growth and expansion of industry. However, the same internet capabilities also lay a foundation for robust counterfeiting opportunities. This article discusses the sale of counterfeit goods on the Internet and the mechanisms available to brand owners to protect their intellectual property rights through enforcement and preventive measures.

Role of the Valuation Analyst in Providing IP Litigation Services and AICPA Professional Standards
James G. Rabe
The typical roles played by CPAs providing intellectual property litigation services include expert witness, consultant, and trier of fact. In performing these services, CPAs must adhere to the relevant AICPA standards, including the AICPA Code of Professional Conduct and the AICPA consulting standards. This discussion provides (1) a description of the typical intellectual property litigation services provided by CPAs, (2) a summary of the relevant AICPA standards, and (3) an overview of the applicable rules of evidence and disclosure requirements.

The Importance of Valuing Intellectual Property from an Attorney's Perspective
Gail Podolsky, Esq.
Valuing intellectual property is one of the most beneficial actions that a company can take. This discussion summarizes (1) the benefits of conducting an intellectual property valuation, (2) the advantages and disadvantages of the current valuation methods used in the profession, (3) which valuation methods have been adopted by the courts, and (4) practice pointers from an attorney's perspective when embarking on an intellectual property valuation.

Intellectual Property Valuation Insights

Valuing Trademark Intellectual Property Using the Relief from Royalty Method
Robert P. Schweihs
In order to conclude the entire value of a trademark using the relief from royalty valuation method, the valuation analyst should properly apply that intellectual property valuation method. There are many ways for the intellectual property owner/operator to commercially exploit a trademark. The valuation analyst should consider the many ways in which the trademark can be commercialized before applying the relief from royalty valuation method.

The Valuation of Copyright-Related Intangible Assets
Katherine A. Gilbert
A copyright benefits from a specific bundle of legal rights that provides the author/creator the right to authorize or to prohibit the uses of the copyrighted work. Generally, the author of the original work owns the copyright, even though there are exceptions to this rule. Copyrights can be sold or transferred by assignment or by licensing. This discussion presents an overview of the generally accepted valuation approaches and methods that the valuation analyst may consider when performing a copyright-related intangible asset valuation.

The Value of a Trade Secret
Robert P. Schweihs
An important distinction between a trade secret and other types of intellectual property is that a trade secret is never registered with a federal or state agency. This discussion describes the generally accepted trade secret valuation approaches, methods, and procedures. The most appropriate valuation method for any particular trade secret valuation analysis is usually influenced by: (1) the purpose and objective of the valuation, (2) the quantity and qualify of available data, and (3) the experience and judgment of the valuation analyst.

Valuation Considerations and Methods for a Patent Valuation Analysis
C. Ryan Stewart
In recent years, the value of patents and other intellectual property has become a significant percentage of the overall value of many business enterprises. Accordingly, there is an increasing focus on the valuation of these intellectual property assets on the part of investment advisers, the accounting profession, and the legal community. This discussion summarizes both the valuation approaches and methods and the investment risk factors that an analyst will typically consider in the valuation of patents and proprietary technology.

Intellectual Property Valuation, Economic Damages, and Transfer Price Analyses
Robert F. Reilly
Intellectual property owner/operators retain analysts to perform various types of analyses, including valuations, lost profits and economic damages analyses, transfer price/royalty rate determinations, remaining useful life estimates, and sale/license fairness opinions. Intellectual property owner/operators need these various analyses for numerous transaction, taxation, accounting, bankruptcy, litigation, and other reasons. This discussion should be of interest to valuation analysts, owner/operators, legal counsel, accountants and auditors, tax professionals, bankers, investors, potential licensors, and potential licensees.

Intellectual Property Transaction Insights

Forensic Patent Evaluations
Mila Shvartsman and Vlad Shvartsman, Esq.
All other factors being equal, a strong patent is worth more than a weak patent. The strength of a patent may be determined based on (1) the description of the invention and (2) the claims that have been made about the invention. A forensic investigation into the strength of a patent may be an appropriate procedure for a buyer/licensee to perform before the purchase or license of the subject patent. In addition, a forensic patent evaluation may help to make the subject patent more valuable.

What to Do When Considering an Intellectual Property Purchase
Scott Slavick, Esq.
This discussion relates to every business that is considering an international intellectual property purchase. This discussion presents several procedures that such businesses should perform in order to make sure that the international intellectual property purchase is effectively and efficiently completed.

IRS Announces that Intangible Assets Qualify as Section 1031 Like-Kind Exchange Property
Robert F. Reilly
In Chief Counsel Announcement (CCA) 2009-11006, the Service announced that certain intangible assets will qualify as Section 1031 like-kind exchange property. While the CCA relates specifically to publishing industry intangible assets, it has tax planning implications for all industrial and commercial taxpayers. This discussion summarizes both this CCA and the general tax benefits related to like-kind exchange transactions.