What is intellectual property?
The intellectual property refers to the legal rights that protect the creations of the human mind, These creations can be literary, artistic, musical works, inventions, names, symbols, designs and other elements related to creativity and innovation., intellectual property is generally divided into two main categories: copyright and industrial property rights.
- Copyright: These protect original works of authorship, such as books, music, paintings, photographs, software and other types of artistic and intellectual creations, copyright grants the creator or owner the exclusive right to reproduce, distribute, display and create derivative works of the original work for a given period of time.
- Industrial property rights: These include rights related to industrial property, such as patents, registered trademarks, industrial designs and trade secrets, patents protect inventions, registered trademarks protect distinctive signs that identify products or services, industrial designs protect the aesthetic appearance of a product and Trade secrets protect confidential information that provides a business advantage.
The fundamental purpose of intellectual property is to encourage innovation and creativity by providing creators and rights holders the opportunity to benefit from their works or inventions, while promoting the dissemination of knowledge and competition, these rights are recognized and protected at the national and international level through specific laws and treaties.
Valuation of intellectual property assets
Assets related to intellectual property (IP) constitute an integral part of the assets intangibles of a company and are backed by legal protection, which can be applied in judicial instances.
These intellectual property assets are independently recognizable, transferable, and have a useful economic life.
Intellectual Property Value
The essence of the value of an intellectual property (IP) asset lies mainly in the right that the owner has to prevent competitors from using it. For said IP asset to have a quantifiable value, it must meet two conditions:
- Produce measurable economic benefits for its owner or user.
- Increase the value of other assets with which it is linked.
Benefits in the future
The value of an intellectual property (IP) asset reflects the potential future economic benefits to the intellectual property holder or authorized user, this value can originate through:
- The direct use of IP by integrating it into the product.
- The sale or licensing of IP to third parties.
- Other strategies, such as raising entry barriers or reducing the threat of substitute products.
Requirements for valuation
To evaluate an intellectual property asset (PI), you need to meet the following conditions:
- It must be clearly independently identifiable, with a specific designation and recognizable description.
- You must have tangible evidence to support its existence, such as contracts, licenses, documented records, or inclusions in financial statements.
- It must have been created at a specific time.
- It must have the capacity to be legally executed and transferred.
- It must be possible to independently distinguish the income stream that corresponds to it, without depending on other assets of the company.
- It must have the possibility of being sold independently of other assets of the company.
- It must be capable of destruction or conclusion at a specific time.
Why carry out an Intellectual Property valuation?
To sell, license or establish commercial agreements related to intellectual property, it is essential to evaluate the value of an IP asset. IP valuation also provides benefits by ensuring compliance with intellectual property rights, facilitating internal management of such assets, and supporting various financial processes.
The valuation of Intellectual Property (IP) is an important process for several reasons:
- Facilitate commercial transactions: It helps determine the value of IP assets, which is essential for sale, licensing or any type of commercial agreement related to intellectual property.
- Legal compliance: IP valuation can be crucial in ensuring compliance with intellectual property rights and in supporting legal cases where the value of intellectual assets needs to be established.
- Internal management: Provides a tool to effectively manage IP assets within an organization, allowing companies to understand and maximize the value of their intellectual property.
- Strategic decisions: IP valuation is essential for strategic decision making, it can help companies identify opportunities to leverage their intellectual assets, whether by expanding their use, finding new markets or optimizing the intellectual property portfolio. .
- Financing: In some cases, companies may use IP valuation as part of their financing strategy, as intellectual assets can be considered as collateral or as a valuable component in the overall valuation of the company.
- Fusions and acquisitions: In M&A situations, IP valuation is essential in determining the total value of the company, it can influence negotiations and the overall valuation of the transaction.
Intellectual Property valuation is a strategic practice that contributes to making informed decisions and maximizing the use of an organization's intellectual assets.