The ability to value, manage and exploit intellectual property has become a specific objective for many firms. The term intellectual property refers to patents, trademarks, designs, copyrights and trade secrets. Intellectual property is a unique class of intangible property because the owner of intellectual property is protected by the law from unauthorised exploitation of it by others.
1) WHAT IS “VALUE”?
The Shorter Oxford Dictionary defines “value” as:
“the material or monetary worth of a thing; the amount at which it may be estimated in terms of some medium of exchange or other standard of a like nature”.
However, the definition of value may alter depending on the context in which it is used and the purpose of the valuation. It will not be possible to define value in a manner that would satisfy all circumstances. Similar items may, at one point in time, have the same value for the same purpose and person. They could have a different value on that date when considered by a different person or for a different purpose. Accordingly, value can have different meanings according to the circumstances in which it is used.
The definition used by most independent accountants for the term “value” is:
“the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm’s length”.
This definition of “value” used by accountants therefore assumes that there is a hypothetical purchaser who is:
* willing but not anxious (i.e. not a “special purchaser”)
* fully informed of the relevant facts
* prudent (i.e. not a gambler)
* willing to pay a fair price rather than miss out
* willing to invest in anything available in the market
* tax neutral for investment purposes (i.e. the investor has no tax incentive or disincentive which... [continues]
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