Wednesday, 10 September 2014

IP markets and enabling information ecosystems: a report -- and a comment

Via our friend Jackie Maguire (CEO, Coller IP, right) comes the following information regarding a new report published this week from innovation agency Golant Media Ventures (GMV) and commissioned by the UK's Intellectual Property Office (IPO).  The report, ‘IP Markets and Enabling Information Ecosystems’ (here) examines how to make IP more easily traded and financed, looking at the key characteristics of IP markets and the information that businesses need if they are to raise finance against and trade in their intangible assets -- this being a follow-up to last year's 'Banking on IP?' report (here, with active response here).   Jackie, one of the experts present at the workshop formed to contribute to the report and also a contributor to the European Commission’s Expert Group on Intellectual Property Valuation (here) says:
“Section 7.6 of the report stresses the need for valuation of intellectual property to be consistent. It states that common valuation methods and consistent and defensible ratings of factors such as will contribute to confidence in evaluating intangible assets.

We agree with these principles, and would add that as IP is, by its nature, innovative and therefore different, each case for valuation requires investigation, rather than a valuation being calculated automatically. IP valuation of a company’s assets is an opinion, at a particular point in time, for a given purpose. Although an informed layman might proffer a good guess, based on history, it is important to note that in the same way that one cannot automate the judgement on a law suit, one cannot automate judgement on an independent IP valuation. There are many factors involved and evidence can have a large impact.

The valuation of IP assets is indeed complicated by the fact that no two IP assets are the same. This is inherently the case when IP is protected by rights such as patents and trademarks, where a requisite for obtaining such rights is that the IP does not already exist.

The uniqueness of IP makes comparisons with other IP difficult, thereby limiting the usefulness of comparison-based pricing. As a result, valuations are often based on assumptions about the IP asset’s future use, what important milestones will be met and what management decisions will be taken.

The use of valuation methods will involve assumptions and judgement by the valuer. All assumptions are derived from and justified based on the bespoke, rigorous analysis of the IP within its business context, together with its importance versus other business drivers, broader industry and competitor constraints and dynamics and economic outlook.”
The main recommendations of the report are that a combined public and private sector effort should be made
* to build on existing solutions such as the Copyright Hub, the Anti-Copying in Design (ACID) Marketplace and similar for patents at home and overseas;

* to develop a framework of standards for how information about intangibles (including their valuation, ownership and use) can be shared by those working across all parts of the private and public sector;

* to bring together the private, public and not-for-profit sectors to develop and trial publicly accessible information services to help build IP markets – focusing initially on accurately identifying who has rights in what;

* to encourage and enable the development of research services which support decision making by businesses, investors and other funders around the sale, purchase, insurance, licensing and financing of intangible assets;

* to identify what information is needed by providers of products (for example, insurances) which reduce the risks associated with intangible assets to the point where funders will treat them as collateral for finance.
How the public and private sector efforts will be brought together is not yet clear.

This blogger would add that the identification and creation of the information discussed here is a necessary condition for the establishment of IP markets, but it is not a sufficient condition unless it actually possesses an enabling capacity.  This is also a function of two things: its availability to people who need it when they need it, and the extent to which it can be confidently appreciated and understood once it is in the hands of its recipient. This is a subject to which IP Finance will return in due course.

1 comment:

Anonymous said...

I don't want to be too critical but I can't see what this report adds beyond the 'Banking on IP' report. It describes the problems and solutions in such a general way that it's difficult to see what the real issues are.