SpicyIP Review: Book on Valuation of IPR


Akshat Pande, Senior Associate and Head-IPR of SRGR Law Offices, has written a book on Valuation of Intellectual Property Rights published by Eastern Law House, Kolkata. Akshat is a company secretary and a practicing advocate. Following is a short note written by Mr.Pande reviewing his own book.
The book is reasonably priced at Rs. 550. This is the first edition of the book and is probably among the first books in India on concepts and fundamentals related to valuation of intellectual property assets.
This book makes an attempt to set out principles, methods, factors and assumptions required to be considered for the purposes of valuation of intellectual property assets. 
The valuation of intellectual property assets is to a large extent determined by the purpose for which the valuation is being done. Purpose determines as to what method has to be applied, what assumptions can be adopted. and it affects value. For example, valuation for a merger is different from valuation at the time of liquidation.
There can be a number of reasons why a company or owner of a particular intellectual property asset would want to evaluate and put a price tag on it. It is extremely interesting to note that the purpose of valuation actually determines which method or assumptions and factors will apply for valuation. Keeping in mind the importance of the purpose of valuation, this book explains the description of various purposes for which valuation may be done and how it affects the valuation exercise.
It further deals with various challenges to valuation of intellectual property assets. Intellectual property assets or rights have certain characteristics of real property, and yet they are significantly different in many ways from real property and these different characteristics pose certain specific challenges when it comes to valuation of the intellectual property assets.  
Intellectual property regime is essentially a creation of certain very specific economic theories which basically try to justify the limited right granted to the owner of the intellectual property asset and create a balance between the social surplus and the innovation surplus. This book explains the economic theories behind creation of the intellectual property rights and how it affects its valuation.   
With the modernisation of businesses, advent of use of technology and brands as important tools of modern businesses, it is to be appreciated that brands, inventions and other forms of intellectual property are extremely important assets for any firm. However, such ‘soft assets’ have their own characteristics, advantages and limitations which are not found in fixed or real assets. This book explains the characteristics of intellectual property rights as an asset of a firm and how these assets interact with other fixed/real/conventional asset in a firm environment.
The economic theories creating the intellectual property assets have been given a specific shape, size and scope by various statutes, precedents and principles. The statutes have been formulated keeping in the background the economic theories regulating the IP rights.  Under Indian laws, intellectual property laws are both statutory as well as under common law.
 It is important to consider the legal profile and characteristics of intellectual property assets for their valuation as the very existence, protection and life of the intellectual property assets are determined by the legal provisions regulating the same. Additionally, as valuation is essentially a commercial and financial function, it is important to note the provisions of financial laws such as taxation, foreign exchange laws etc. affecting or regulating the realisation of revenue by exploitation of the intellectual property assets.
This book delves into understanding the legal profile of the intellectual property assets, how the legal provisions applicable to a particular asset will regulate or affect the valuation exercise and details certain provisions of specific statutes which affect the valuation exercise.
An important aspect of intellectual property laws is the exclusive rights granted to the owner using which he/it can stop others from infringing his/its intellectual property rights. This is typically done by claiming damages in a civil suit. Therefore, it is extremely important to consider the legal provisions determining the valuation of intellectual property asset in question to determine the quantum of damages to be claimed by the plaintiff. This book analyses the Indian precedents   of valuation of damages in a civil suit situation and proposes certain well laid down international concepts of valuation of damages.
There are various methods of valuation of intellectual property assets which may be applied in different circumstances depending on the determining factors as observed above. The cost method of valuation provides sort of a benchmark of the value as it provides reproduction cost or replacement value of the asset.
Market method determines the value of asset under question with its comparables in the market having similar characteristics and factors. Value based method tries to find out the value of an asset by discounting the future cash flows arising out of the exploitation of the asset in future, discounted at a given rate.
Other methods include the use of thumb rule, calculation of reasonable royalty etc. There are few modern economic methods of valuation which have been explained based on decision tree analysis, contingent claim analysis and continuous time option valuation model.   
 The last part of the book deals with strategies related to creation of value out of one’s intellectual property assets. Along with protection, an essential feature of intellectual property laws is to allow commercial exploitation of the intellectual property rights so that the creators/inventors may benefit out of it and therefore innovation is encouraged.

This part of the book provides guidelines for businesses to organise themselves internally and externally to maximise returns out of exploitation of intellectual property assets. This part also deals with licensing strategies which a firm can implement.

This book attempts to analyse, use and implement international concepts, precedents and principles regarding valuation of intellectual property assets and attempts to customise them to India-specific situations. 

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