Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles

8/8/2019 Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles

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Valuing the Intangible: Where to Start?The Full Family of Intellectual Property andOther Intangibles

Sponsored by Sheppard MullinDecember 22, 2009

Presented by:CONSOR ® Intellectual Asset Management

www.consor.com

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TopicsWhy are intangibles important in today’s economy?

Why are they relevant to your p ractice?

Defining terms: Intangible Assets and Intellectual Property

Intangibles as common thread in and out of litigation

Fundamental problem: what are they worth?

How are intangibles valued in practice?

How can intangible-related damages be quantified?


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Why Should I Care?

Commercial and litigation business cli ents rely on pro tectingand growing their brands, leveraging them through licensing;or guarding their technical advances and unique productfeatures from competitors.

Beyond specialized IP law practices, business, commercial, taxand estate practitioners increasingly have to be involved inidentifying, protecting, applying, and defending intangiblesowned by businesses and individuals.

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Intangible Assets and Intellectual Property

Intellectual Property are the various types of rights givenspecific legal protection.Traditionally inc luding:

CopyrightsPatentsTrademarks

And increasingly extended to:Trade secretsRights of publicity



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Business IA and IP

Intellectual Property

PATENTS

COPYRIGHTS

TRADEMARKS

TRADESECRETS

Intangible Assets

Data &Knowledge

Bases

COPYRIGHTS

Customer& VendorRelations

ProprietarySoftware

InternetAssets

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IP Valuation Tools and Methodologies

Traditional MethodologiesMarket ApproachCost ApproachIncome Approach

Proprietary MethodologiesVALMATRIX®

VALCALC®

BVEQ™



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Case Studies

Case #1 – Woody Allen:Valuing Celebrity Rights and Rights of PublicityCase #2 – adidas:The Largest Trade Dress Award in HistoryCase #3 – Tower Records:Extracting Value in BankruptcyCase #4 – The Marlon Brando Estate:Estate Planning and Tax IssuesCase #5 – Sara Lee vs. Jimmy Dean:

Valuing Intangibles in Contract DisputesCase #6 – IP in Corporate Financing Deals

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Case Study #1: Woody AllenWoody Allen

Litigation – unauthorized use of name

Comparable product endorsement fees

Publicity rights infringement

Consumer impressions

Market Approach

$5.0 Million

Client:

Context:

Components:

Cause:

Approach:

Concept of Value:

Total Damages:



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Case Study #1: Woody Allen (cont’d)

The establishment of value for these intellectual propertyrights, both for a deal structure and in l itigation

Customs and practices regarding rights ownership, usage, andfee structures

Econometric modeling of litigation outcome

Precise prediction of settlement amount

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Case Study #2: adidasadidas

Trademark / trade dress infringement

Valuation of trademarkEstablishment of trade dress componentEstablishment of total damagesValuation of damages to trade dress

Components of value

Market Approach, Relief from Royalty

$304.6 Million

Client:

Context:

Components:

Approach:

Concept of Value:

Awarded Damages:



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Case Study #2: adidas (cont’d)

Largest trademark and trade dress award in history

Defendant: Payless Shoes

Calculated actual damages of $31.3 million

Product sourcing fees of $10 million disallowed since Paylesscould have procured sourcing independent of adidas

Data related to actual sales and licensing activi ties were critical

Judge reduced damages to 2x our damage calculations

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Case Study #3: Tower RecordsTower Records

Bankruptcy

TrademarksDomain namesWebsite / Internet platformsDatabasesFranchise agreements

Sequestered auction

Liquidation

$4.5 Million

Client:

Context:

Components:

Approach:

Concept of Value:

Total Damages:



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Case Study #3: Tower Records (cont’d)

Extracting value in bankruptcy

Sale 9 months after store closures

Targeted global IP asset sale marketing campaign

Estimated asset value $1.0 – 2.0 million

8 international bidders, 36 hour auction process

+ / - $4.5 million

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Case Study #4: The Estate of Marlon BrandoThe Estate of Marlon Brando

Estate planning and tax issues

Post-mortem rights of publicityEstate value

IRS audit

Analysis of historical income

Income approach

$1.4 million

Client:

Context:

Components:

Cause:

Approach:

Concept of Value:

Total Value:



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Case Study #4: The Estate of Marlon Brando (cont’d)

Estate planning and tax issues

Value of post-mortem rights of publicity

Valuation to meet IRC § 2031

Historical endorsement deals to predict future revenue

Present value of 10 year future st ream of revenue set at $1.35million

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Case Study #5: Sara Lee vs. Jimmy Dean

Sara Lee

Contract dispute

Valuation of stock distributionValuation of dividend incomeValuation of paymentsValuation of retirement benefits

Trademark infringement

Discounted cash flows

Income ApproachEnterprise Valuation

Client:

Context:

Components:

Cause:

Approach:

Concept of Value:



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Case Study #5: Sara Lee vs. Jimmy Dean (cont.)

10,000,000Retirement benefits

$ 325,000,000TOTAL VALUE

85,000,000Dividend income

30,000,000Payments

$ 200,000,000Stock distributionEstimated ValueCategory

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Case Study #6: IP Securitization

Global Real Estate Services Franchisor

Several hundred million dollar IP-backedsecuritization

Trademarks and brand assetsFranchise services

Corporate restructuring

Revenue projectionsRoyalty cash flow allocation

Market approachIncome approach

Client:

Context:

Components:

Cause:

Approach:

Concept of Value:



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Case Study: IP Securitization

Goal: Secure financing for corporate expansion backed by the company’scash flows and IP

Task: Identify and value the bundles of intangibles to be transferred and/or licensed to t he special purpose entities (SPE) that will hold the IP andprovide the franchise support services:

Performed a Brand Apportionment Analysis to allocate value between the IPand the Franchise Support Services being providedDetermined the fair market value of the fully paid-up IP license to be grantedback to the operating companyDetermined the total value of the IP in the US to enhance investor confidence

Interfaced with the investment bank to support the stress testing scenarioanalysis– an essential element to assess the risk profile for the ratingagencies and surety providers

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Discussion of Current Cases&

Questions

Documents

Valuing the Intangible: Where to Start?: The Full Family of Intellectual Property and Other Intangibles