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Trademark Valuation: A Tool for Brand Management, 2nd Edition

ISBN: 978-1-118-24526-2
368 pages
November 2013
Trademark Valuation: A Tool for Brand Management, 2nd Edition (1118245261) cover image
A practical and useful resource for valuing trademarks

The Second Edition of Trademark Valuation is a fresh presentation of basic valuation principles, together with important recent changes in worldwide financial reporting regulations and an update on the current worldwide legal conditions and litigation situation as they relate to trademarks.

A new section discussing issues surrounding valuation of counterfeits and the economic effects of trademark counterfeiting is included in this informative Second Edition.

  • Considers methods to determine the real value of your trademark and exploit its full potential
  • Offers dozens of case studies that illustrate how to apply valuation methods and strategies to real-world situations
  • Communicates complex legal and financial concepts, terms, principles, and practices in plain English
  • Discusses GATT, NAFTA, emerging markets, and other international trademark considerations
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Preface xi

Acknowledgments xiii

Chapter 1 The Nature of a Trademark 1

Trademark Defined 2

The Legal Underpinnings of Trademarks 17

Trademarks, Brands, and the Products and Services They Represent 20

Summary 29

Chapter 2 Valuation Basics 31

The Business Enterprise 31

Valuation Principles 46

Property and Rights to Property 50

Premise of Value 51

Valuation Methods 57

Summary 59

Chapter 3 Using Financial Information 61

Financial Reporting 62

Financial Statements and Value: Disaggregating S&R’s Assets 65

Tax Issues 77

Summary 81

Chapter 4 Trademark Valuation 83

Cost Method 84

Estimating Reproduction and Replacement Cost 87

Using the Cost Method for Trademarks 90

Market Method 94

Using the Market Method for Trademarks 98

Income Method 101

Using the Income Method for Trademarks 106

Summary 106

Chapter 5 Trademark Economic Benefit 107

Future Economic Benefit 107

Quantifying Economic Benefit 116

Direct Techniques 118

Indirect Techniques 133

Summary 137

Chapter 6 Income Method: Economic Life and Risk 139

Defining Economic Life 140

Trademark Economic Life and Pattern 144

Survivor Curves and Studies of Historical Life 154

Forecasting Growth 157

S-Curves in General 161

Elements of Risk 164

Summary 171

Chapter 7 The Income Method: Putting It All Together 173

Trademark Valuation by Residual 173

Multiple Exploitation Scenarios 184

Valuation Based on Income Allocation 186

Summary 187

Chapter 8 Trademark Licensing Economics 189

Licensing Economics 189

Some General Thoughts 193

Royalty Quantification 195

Quantification Techniques 197

Scoring and Rating Techniques 201

Discounted Cash Flow Model 205

Dividing the Economic Benefit 208

Another Analytical Technique 210

Rules of Thumb 211

Summary 212

Chapter 9 Quantification of Harm in Trademark Enforcement Cases 213

Civil Trademark Enforcement Actions 214

Monetary Recovery in Civil Actions 217

Enhancement of Monetary Recovery 227

Valuing Counterfeits for Purposes of Criminal Sentencing 232

Summary 234

Chapter 10 Special Trademark Valuation Situations 235

Trademarks in Finance 235

Trademarks in Bankruptcy 238

Valuation Directions 244

Trademarks and Ad Valorem Taxes 248

Summary 249

Chapter 11 Global Trademark Issues 251

Trademark Holding Companies 252

The Scourge of Trademark Trolls 253

International Valuation Standards 255

Counterfeiting: A Worldwide Contagion 257

Political/Investment Risk 259

Summary 261

Appendix A Basic Investment Principles 263

A Certificate of Deposit Example 263

The Arithmetical Foundation 266

Appendix B Theoretical Foundations for the Determination of a Fair Rate of Return on Intellectual Property 269

Appendix C Investment Rate of Return Requirements 271

Investment Risk 272

Required Rate of Return Components 273

Rate of Return Models 274

Arbitrage Pricing Theory 278

Venture Capital 279

Weighted Average Cost of Capital 281

References 284

Appendix D Predicting Sales and Revenues for New Ventures with Diffusion Models 285

New Product Sales Forecasting Models: Product Diffusion 286

Types of Product Diffusion Models 288

The Bass Model 290

Caveats of the Bass Model 293

Summary 294

References 295

Appendix E Dealing with Uncertainty and Immeasurables in Trademark Asset Valuation 297

Elements of Valuation Analysis 298

Decision Analysis and Decision Trees 301

Monte Carlo Techniques 309

Obtaining Information from Indirect Observation 317

Option Pricing Models 323

Good Enough Decision Making 325

Summary 332

About the Authors 333

Index 335

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Gordon V. Smith is Chairman Emeritus of AUS Inc., a multidiscipline consulting and market research firm, a member of the Board of Trustees of the University of New Hampshire School of Law, and Distinguished Professor of IP Management at the law school's Franklin Pierce Center for Intellectual Property. During his long consulting career, he has advised clients on the value of intellectual property and closely held stock and has consulted in support of transactions, litigation, and tax-related matters. He is the author and coauthor of several books on IP valuation and exploitation strategies. An active international lecturer, Smith is Chair of the Advisory Board of the Licensing Economics Review, as well as an Adjunct Professor at the National University of Singapore (Division of Engineering & Technology Management). Mr. Smith earned an A.B. degree from Harvard University in 1959.

Susan M. Richey is a Professor of Law at The University of New Hampshire School of Law (formerly the Franklin Pierce Law Center) and a former Associate Dean of the law school. She recently completed an appointment as Visiting Distinguished Scholar with the International Economic and Commercial Law Group at the University of Limerick in Ireland. Richey has been involved in numerous programs teaching intellectual property concepts to nonlawyers, including workshops sponsored by the World Intellectual Property Organization and UNITRAD, the trainingarm of the United Nations. Active in the International Trademark Association (INTA), she served a three-year appointment as an editor of The Trademark Reporter, a scholarly publication of INTA, a two-year appointment as Chair of INTA's Panel of Neutrals, and she currently serves on INTA's Academic Committee.

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