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Intellectual Property: Valuation, Exploitation, and Infringement Damages, 2016 Cumulative Supplement




Intellectual Property: Valuation, Exploitation, and Infringement Damages, 2016 Cumulative Supplement

Russell L. Parr, Gordon V. Smith

ISBN: 978-1-119-23903-1 February 2016 448 Pages


Up-to-date, expert guidance and a valuable tool kit for IP valuation

Intellectual Property, Valuation, Exploitation, and Infringement Damages provides practical tools and expert clarification for the valuation of intangible assets. This new 2016 Cumulative Supplement contains the latest laws, regulations, and practices surrounding licensing and joint ventures, with practical analytical models that simplify the calculation of royalties and equity splits. As a companion to the comprehensive Intellectual Property, this book provides invaluable guidance toward the investment aspects, business strategies, taxes, and accounting practices involved in intellectual property protection and profit, to help licensing professionals structure optimal arrangements and mitigate risks. Written by leading experts in the intellectual property realm, this guide is a must-have resource for anyone working with intangible assets.

Intellectual property is more than a simple profit center; to many owners, it's the cornerstone of their organization, and must be rigorously protected and exploited to the fullest extent. This book provides clear guidance on valuation, which is the foundation of a successful IP strategy.

  • Define the value of intangible assets in real-money terms
  • Examine the business economics of licensing and joint venture strategies
  • Understand the relevant legal, tax, and accounting practices
  • Determine fair royalty rates and equity splits

Patents, trademarks, formulas, copyrights, brand names, distribution systems—all fall under the intellectual property umbrella, and each might be the competitive edge upon which a business is built. Intellectual property can cost hundreds of millions of dollars to create, and is often irreplaceable with no substitute or alternative available, making it an organization's most important asset. Protect it properly, and reap every ounce of profit it can produce with the important guidance in Intellectual Property, Valuation, Exploitation, and Infringement Damages, 2016 Cumulative Supplement.

Preface xix

Part I Valuation 1

Chapter 1A Intellectual Property Landscape (New) 3

1A.1 80% of Corporate Value Is Intellectual Property and Intangible Assets 4

1A.2 Over Seven Million Patents 6

1A.3 Corporations Own the Most Patents 7

1A.4 All Industries Are Patenting Inventions 8

1A.5 Trademarks 10

1A.6 Trademarks Are Supported with Huge Ad Spending 11

1A.7 Copyrights 12

1A.8 Trade Secrets 12

1A.9 Business of Licensing 15

Chapter 1B U.S. Congress Flirts with Disaster (New) 25

1B.1 Patent Litigation Venue 27

1B.2 Patent Infringement Damages 27

1B.3 Injunctions for Only Competitors 29

1B.4 Harming Our Only Economic Advantage 31

Chapter 12A Risk-Adjusted Cash Flows (New) 32

12A.1 Required Rates of Return 33

12A.2 Capital Asset Pricing Model 36

12A.3 Build-Up Method 41

12A.4 Venture Capital Rates of Return 42

12A.5 Probability of Success 45

12A.6 Conclusion 49

Chapter 12B Dealing With Risk and Uncertainty in Intellectual Property Valuation and Exploitation (New) 51

12B.1 Risk versus Uncertainty 53

12B.2 Decision Analysis and Decision Trees 55

12B.3 Decision Tree Components and Conventions 56

12B.4 Monte Carlo Techniques 63

12B.5 Markov Chains 66

12B.6 Obtaining Information from Indirect Observation: Shadow Pricing 70

12B.7 Bayesian Analysis 72

12B.8 Option Pricing Models 75

12B.9 Limitations on Rationality in Decision Making: The Effects of Perception and Biases on Decision Making 78

12B.10 Conclusion 79

Chapter 14A Rights of Privacy, Publicity, and Celebrity Persona (New) 81

14A.1 Introduction 81

14A.2 Legal Underpinnings 84

14A.3 Trademark Rights 87

14A.4 Copyright 88

14A.5 Legal Uncertainties and Solutions 90

14A.6 A Photography Issue 91

14A.7 Conclusion 93

Chapter 14B Intellectual Property and Intangible Asset Volatility (New) 95

Part II Licensing 101

Chapter 27A Royalty Rates and License Fees for Technology (New) 103

27A.1 Royalty Rates 104

27A.2 Per Unit Royalties 107

27A.3 Royalties Based on Profitability 108

27A.4 License Fees 109

27A.5 Medical Device Industry Royalty Rates 111

27A.6 Medical Device Industry License Fee Distribution 112

27A.7 Conclusion 114

Chapter 27B License Fees and Royalty Rate Frequency for Technology (New) 115

27B.1 Real Deal Royalty Rates 116

27B.2 Per Unit Royalties 118

27B.3 License Fees 119

27B.4 Conclusion 120

Chapter 27C Royalty Rates and License Fees for Pharmaceuticals And Biotechnology (New) 121

27C.1 The Parties—Licensing between Corporations Dominates 122

27C.2 Royalty Rates 122

27C.3 License Fees 124

27C.4 Key Technologies 125

27C.5 Developmental Stages of Technology 126

27C.6 Conclusion 128

Chapter 27D Licensee Fees and Royalty Rates for Technology Update (New) 129

27D.1 Per Unit Royalties 131

27D.2 License Fees 132

Chapter 33A The Magnitude and Meaning of Royalty Misreporting (New) 134

33A.1 Introduction 134

33A.2 “Why?” versus “How?” 135

33A.3 Math Errors: 5% Error Rate 138

33A.4 Royalty Rate Errors: 4% Error Rate 139

33A.5 Transfer Prices: 4% Error Rate 141

33A.6 Unreported Benchmarks and Milestones: 5% Error Rate 142

33A.7 Unreported Sales: 16% Error Rate 143

33A.8 Disallowed Deductions: 9% Error Rate 143

33A.9 Unreported Sublicenses: 17% Error Rate 144

33A.10 Questionable License Interpretation: 40% Error Rate 144

33A.11 Conclusion 145

Chapter 33B Intellectual Property Audit and Management (New) 146

33B.1 Introduction 147

33B.2 Intellectual Property Is Important 147

33B.3 But Intellectual Property Is Frequently Mismanaged 148

33B.4 Why the Intellectual Property Dichotomy? 148

33B.5 The First Step: An Intellectual Property Audit 149

33B.6 From IP Audit to IP Management 151

33B.7 Insufficient Approaches 152

33B.8 A New Intellectual Property Management Paradigm 153

33B.9 Available Tools 153

33B.10 Benefits of Intellectual Property Management 154

33B.11 When to Do an Intellectual Property Audit 155

33B.12 How to Do an Intellectual Property Audit 157

33B.13 Software Solutions to Make the Job Easier 160

33B.14 Conclusion 163

Chapter 35A Quantifying Reasonable Royalties: The Entire Market Value Rule (New) 167

Chapter 35B New Guidance about Apportionment (New) 178

35B.1 Apportionment of the Royalty Base 178

35B.2 The Infringed Invention 179

35B.3 Determination of Damages 181

35B.4 Georgia-Pacific and the Hypothetical Negotiation 184

Chapter 35C Lost Profits for New Businesses (New) 188

35C.1 Why Are Profits Missing 189

35C.2 Guidance from Business Plans 190

35C.3 Management Team 190

35C.4 Operating Capital 191

35C.5 Comparables 191

35C.6 Defendant’s Profits 192

35C.7 Before-and-After Analysis Will Not Work 192

35C.8 Lost Business Value 192

35C.9 Conclusion 193

Chapter 45 New Measure of Infringement Damages—Future Damages (New) 194

45.1 Royalty Rate for Future Damages 196

45.2 What about Future Lost Profits? 207

Chapter 45A Continually Evolving Patent Damages (New) 208

45A.1 Post-Verdict Royalty Rates 209

45A.2 Optimize Your Patented Technology or Lose It 214

45A.3 Litigation-Based Licenses 217

Chapter 45B The 25% Rule Is Dead (New) 222

Appendix G More Sample Royalty Rate Information (New) 225

Appendix H Trademark Royalty Rates (New) 253

Appendix H-A More Trademark and Copyright Royalty Rates (New) 271

Appendix I Pharmaceutical and Biotechnology Royalty Rates (New) 309

Appendix J Telecommunications Royalty Rates (New) 333

Appendix K Electrical and Energy Royalty Rates (New) 369

Index 403