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Methodology	Considers	Ignores
25 Percent Rule	Projected gross revenues	• Means to predict gross revenues and profits • Varying degrees of investment and risk • Differences in go-to-market and sales costs for different technologies • Alternative (competing) technologies • Empirical data that show unwillingness to pay more than 10% of net profits in royalties
Industry Standard Royalty Rate	Royalty rates in past transactions in an industry	•Inherent dissimilarity of IP assets (patentability requires uniqueness) •Published royalty rates cover broad industry classifications and vary widely within each industry classification •Terms such as upfront payments, license fees, minimum and maximum royalties and cross licenses
Ranking (often used with industry standard royalty rates)	• Scoring criteria (most popular being Georgia Pacific) • Scoring system • Scoring scale • Score weights	•Subjectivity in selecting scoring criteria, scoring system, scoring scale and scoring weights •Subjectivity in translating final score into royalty rate percentage or dollar amount • Inability to accurately identify comparable IP
Surrogate Measures	• Prior Art Citations • Total royalty income • Patent maintenance fees	• Uncertain relationship between value of individual patents and value of patent portfolio • Uncertain relationship between factors considered and IP value • Potential for manipulation of factors
Monte Carlo	• Range of values for NPV variables •Probability for each value	• Difficulty in obtaining information on value • Expense to maintain databases to store necessary information
Real Options	• Decreased risk over time	• Mathematical complexity • Extensive database to use real options

Courses:

Valuation of Early-Stage Technologies

Business Development Academy

Featuring the CAV method, this seminar compares the utility and results generated by CAV to a host of traditional valuation methods. Working in small groups, this ½ day seminar enables executives to value their IP and technology.

Articles:

A New Method to Value
Intellectual Property

Ted Hagelin

American Intellectual Property Law Association Quarterly Journal, Vol. 30, p. 353, 2002

A primer on current valuation methods for intellectual property, and an introduction to a new method, Competitive Advantage Valuation.

Competitive Advantage Valuation of Intellectual Property Assets: A New Tool for IP Mgrs.

Ted Hagelin

IDEA: The Journal of Law and Technology, Vol. 44, p. 79, 2003

An introduction to a new method to value intellectual property assets - Competitive Advantage Valuation (CAV). The use of CAV to value patents, research and development investments, and patent licenses is explained through a series of hypothetical valuation examples.

Valuation of Patent Licenses

Ted Hagelin

Texas Intellectual Property Law Journal, Vol. 12, p. 423, 2004

A discussion of valuing patent licenses using the CAV method, including licenses to non-competitor and competitor firms, and exclusive,limited-exclusive and non-exclusive licenses.