The most common definition states that intellectual property (IP) is “A work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc.” While so many assets are tangible, intellectual property is in the intangible category. It is distinguished by the fact that it doesn’t have a physical presence. The unique and non-physical nature of intangible assets makes them challenging to appraise, but they can represent immense value for their creators and owners. The value of intellectual property can be affected by numerous factors, such as restrictions and special features, limitations, functions, and risks, and your valuation expert must be aware of these considerations to produce a well-supported conclusion.
Performing an appraisal to gain awareness of the true worth of intellectual property is essential for companies and individuals. The process provides a defensible value of the IP – whether it is the Nike “swoosh”, the Susan G. Komen pink ribbon, the Coca Cola bottle, a Prada bag or other distinctive ideas, products and services – that can be used to support a sale, financing, licensing or franchising deals, tax planning, transfer pricing, or litigation. An intellectual property appraisal is an important tool for every business.