What to Consider When Valuing Your Trade Mark
Trade marks are quickly becoming a valuable asset for many businesses. However, it can be difficult to ascertain the value of your registered trade mark. This is because there are many different methods for valuing your intellectual property. To give you a better insight into valuing a trade mark, this article outlines the most common valuing methods practitioners use and other points to consider when valuing your trade mark.
Qualitative and Quantitative Value
Trade marks are an interesting creature of the law. They have both a qualitative and quantitative value. In the eyes of a trade mark attorney, a trade mark is valuable because of its qualitative characteristics. For example, the extent of the protection it provides and the goodwill of the business that it is associated with. On the other hand, in the eyes of someone buying and selling a trade mark as an intangible asset, a trade mark has a quantitative value. For example, how much revenue it generates through licensing.
When you consider the value of a trade mark, you must remember these qualitative and quantitative elements.
Remember, when an expert values your trade mark, they can only estimate the value of your trade mark. You will only know the ‘true’ value once you sell your trade mark at an agreed price.
Why Value Your Trade Mark?
There are many reasons why trade mark owners might want to value their trade mark. Determining the value of your trade mark can:
- benefit business decision making, particularly concerning growth opportunities;
- help you consider whether to use your trade mark as collateral for obtaining debt finance for your business;
- attract venture capitalists to invest in your business;
- settle legal disputes in the instance of trade mark infringement; and
- assist you to negotiate commercial opportunities, such as licensing or selling your registered trade mark.
If you find yourself in any of the situations listed above, it may be useful to consider valuing your trade mark.
Methods for Trade Mark Valuation
There are many different methods practitioners use to value a business’ intellectual property. You can find a summary of the three most common valuation methods below.
|Income Method||A practitioner will value your registered trade mark based on its expected future earnings. They will then adjust this trade mark value to its present value. For example, if you regularly license your trade mark at a fee, a practitioner might value your trade mark based on its expected earnings.|
|Market Method||Practitioners will often use the market method, where there are compatible trade marks in the market that protect similar products to your own. Under this method, your trade mark will be valued based on the transaction price of the comparable trade mark.|
|Cost Method||You can use a cost approach where a similar trade mark of comparable quality has recently been sold. As with the other methods, a practitioner can only provide you with a close estimate of your trade mark value since it is likely that your trade mark will protect a unique product that your business produces.|
Preparing for Trade Mark Valuation
Before you begin to value your trade mark, you should consider conducting an IP audit. In the same way that any business would conduct an inventory check, an IP audit allows a business to systematically review the intellectual property owned and used by your business.
Trade mark attorneys or specialised lawyers typically conduct IP audits for a business alongside representatives from a business’ management. Whilst there is no requirement under trade mark law that a lawyer conducts an IP audit, it would be wise to seek the help of an experienced practitioner who can readily identify the IP in your business. Amongst many things, a lawyer can help you conduct an IP audit by:
- identifying the legal owner of the trade marks used within your business;
- examining the details of licensing agreements; and
- explaining how your business can use its trade marks.
After completing an IP audit, you should compile and update a database to keep track of the trade marks that your business uses.
Although the value of your trade mark will fluctuate depending on a range of factors, a skilled legal practitioner can give you a close estimate of its value. When you consider valuing your trade mark, you should be aware of the different methods that practitioners can use to determine the value of your trade mark. These methods include the income method, the market method and the cost approach.
Frequently Asked Questions
Trade mark registration will provide you with the exclusive rights to use, licence and sell your trade mark. If someone uses a similar or identical mark in relation to similar goods or services, you have the legal means as a trade mark owner to prevent the other person from doing so.
Amongst other requirements, your application must include your personal details, a description of your intended trade mark and details of the classes of goods and services that you wish to register your trade mark in connection with.