Finance

Trends in the Intellectual Property Valuations

We take a straightforward approach to intellectual property valuation. Before we begin our study, IP metrics tries to gain a thorough understanding of your assets and circumstances. Once we have a clear knowledge of these critical factors, we carefully perform our research and analysis to ensure that all essential inputs are captured and all potential elements are taken into account to offer you accurate, valuable, and complete information.

In many industries, intellectual property valuation has accounted for an ever-increasing amount of economic value during the last decade. Let’s take a look at some additional interesting IP trends that have emerged over the last decade based on data from thousands of real-world licensing agreements. The data for this year-over-year comparison has been standardized so that the general trends may be seen.

Bases for Royalty Payment Agreements:

Royalty payment agreements are almost written as a percentage of revenue, either net or gross. The compliance of the agreement is ensured by a completed transaction. Other factors and expenses, make profit-based royalty payment arrangements more difficult. While the number of agreements with royalty rates based on sales has remained high. Royalty rates based on net earnings, gross earnings, and cost have grown more common. We’ve also noticed a decrease in the number of agreements that take assets or operational earnings into account in recent years.

Which Industries Are Transacting?

According to a survey, the majority of transactions are concentrated in a few industries. In 2007, the top five industries accounted for 46% of all transactions. In 2016, they accounted for 55% of all transactions. Between 2007 and 2009, most industries seemed to have escaped the impact of the Financial Crisis. However, other industries, such as biotechnology and pharmaceuticals are on the rise. Industry sectors such as consumer and business services are either declining or stagnant.

What Types of Agreements Are Transacting?

The percentage of service agreement types is decreasing with the decline in activity in the consumer and corporate services industries. Since 2013, software, collaborative development, and asset acquisition agreements have seen irregular activity. We also see a continuous increase in the sorts of manufacturing/process intangibles agreements. The recent rebound of marketing intangibles might be linked to an increase in mergers and acquisitions activity, implying a rise in brand turnover or management.

Conclusions from Royalty Rate Data:

Based on royalty rate statistics during the last ten years:

Royalty rate bases have become more diversified, implying that companies are becoming more confident in their prospects. As a result, they are becoming more creative with their engagements.

Pharma and biotech are displacing traditional businesses like electronic products and services. This decrease in the number of transacting industries might indicate that a transformation is happening in the marketplace.

Except for software, all agreement types appear to be recovering after the 2014-2015 slump, which might signify a market change.

Check out the Royalty Rate Benchmarking Guide, 2017/2018 Global Edition for more information on license agreements and royalty rates in certain sectors and forms of intellectual property valuation. Explore the database, which is accessible from BVR, for more detailed data based on your specified search parameters.

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