26/28/04/2014 – Valuation of PatentsHG-6

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Principles of IP Valuation

Heinz Goddar

Boehmert & Boehmert

26/28/04/2014 – Valuation of PatentsHG-6

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IPR Valuation Methods

Cost Approach Market Approach

Comparison with relevant “deals”

Yield Approach

26/28/04/2014 – Valuation of PatentsHG-6

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Yield Approach

Similar to employees’ invention remuneration in Germany

Methods used for employees’ inventions License analogy Savings Free estimation

NPV determination similar to lump-sum invention remuneration

26/28/04/2014 – Valuation of PatentsHG-6

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License Analogy

Royalty Rate

Royalty Base

NPV determination

26/28/04/2014 – Valuation of PatentsHG-6

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NPV Determination

Time and extent of expected use Life time of patent Expected turn over Business Plan

Pension formula for determination of NPV

26/28/04/2014 – Valuation of PatentsHG-6

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“Pension Formula“ for NPV

C1 C2 Cty NPV = C0 + ------- + --------- + ..... ---------- 1 + r (1 + r)2 (1 + r)ty

wherein C0 is the royalty cash flow in the starting year, C1 in the first year thereafter, and so on, until Cty means the royalty stream in the terminal year of (patent) protected sales. Furthermore, r is the discount rate to be applied, i. e. the average bank interest rate for lending money to be applied, e.g. 10% interest means r = 0.1.