If you’re looking to protect your intellectual property it’s important to identify and value your assets before you take action. This involves identifying where IP is used and who it’s currently owned by, and how much the IP is worth. If you’re unsure how to go about this you may wish to speak to a patent lawyer.
Why should I identify and value my assets?
Before you can protection your assets you need to know precisely what needs protecting and how much it’s worth. This information is required when applying for patents or trademarks. Valuing your assets also gives an indication of how your business is progressing and how much it is worth.
What are assets?
There are two main types of business assets: tangible and intangible. Tangible assets are physical objects or items such as computers or factory machinery. Intangible assets are abstract ideas or creations such as your company’s brand name, logo or slogan. Intangible assets are harder to identify and value for several reasons, mostly because there is no universal set of valuing values that can be applied in every circumstance. This is not true for tangible assets; many businesses are likely to use the same factory machinery and there will be historical precedent on the value of this machinery based on sales and purchases.
How to value tangible assets
The value of an asset is no more or less than someone is willing to pay for it. If you have an established business then tangible assets can be valued according to the net book value (NBV), which is the value of the assets that are stated in the business accounts. The NBV figures can be adjusted to take into account various economics, such as a change in market value. You should also note that the value of many tangible assets depreciates with time due to wear and tear.
How to value intangible assets
Intangible assets are often a firm’s most valuable, yet the true monetary value can be difficult to determine. Unlike tangible assets, intangible assets often increase in value over time. Yet accountancy rules do not allow this increase to be conferred in balance sheets. Intangible assets are very difficult to value as you have no precedent over how much someone would be willing to pay for yours. To make things more difficult, standard accountancy tests for IPR value are normally inapplicable to intangible assets. Three main methods exist for valuing intangible assets:
- Market approach – based on what third parties have paid for similar intangible assets in the past. This is the most difficult valuation to apply
- Income approach – the value of an asset is the same as the present value of future earnings from the asset
- Cost approach – the asset is worth the cost of constructing or creating a new intangible asset that is broadly similar to the one being valued
Protecting your assets
Once your assets have been identified and valued you can arrange protection – the type of protection and the process will depend on the asset being protected. Please see our full guide to how to protect your intellectual property rights for more information on patents, trademarks and other forms of legal protection.