Using the Market To Determine IP's Fair Market Value

Abstract

OVERVIEW:As a result of recent accounting rule changes and the enforcement implications of the Sarbanes Oxley legislation, fair market value of intellectual property (IP) is now reported in greater detail on corporate ledgers. This additional information is designed to satisfy not only the demands for IP value that are coming from within a corporation, but from the capital markets (investors, analysts and media) as well. This transformation of corporate IP from an internal strategic to a public financial matter gives CTOs an entirely new opportunity to demonstrate their direct contribution to both the bottom line and a company's market value. To help CTOs exploit this opportunity, and because public markets reward those who manage well that which they can measure, this article presents a market-oriented valuation hierarchy, including a new asset-class indexing method that is especially useful for early-stage R&D. It also illustrates a spectrum of financially-oriented asset management opportunities and practices CTOs should consider as the managers of a technology company's most valuable asset—its IP.

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