3 Approaches to IP Valuation for Pandemic Recovery

Forensic & Litigation Consulting

May 29, 2020

Benjamin Franklin's $100 dollar bill

The COVID-19 pandemic sent shockwaves around the globe, many of which still reverberate. Facing a public health crisis, many countries, including the U.S., enacted strict measures to slow the viral spread. While closures, shelter in place orders, and social distancing efforts may have lessened the infection count, an economic cost was extracted.

As unemployment levels soared, other unintended consequences manifested including the crippling of many businesses, both large and small. Unfortunately, in some cases, these entities will shutter permanently.

As companies attempt to climb out of the COVID-19 inflicted rubble, difficult choices will be weighed. For some, these alternatives may include bankruptcy or restructuring. For others, a merger or acquisition may be on the horizon, whether welcomed or not.

Other options may encompass a sale or licensing of assets for a needed cash infusion. Regardless of which path is taken, a rigorous valuation of a company’s intellectual property will likely be required.

For many U.S. businesses, one of the most valuable assets on the balance sheet is intellectual property. In fact, in many cases, various forms of intellectual property and intellectual capital provide the competitive advantage necessary for success.1

As such, assigning a reasonable value to these differentiating assets is paramount in a restructuring, sale, or licensing situation, in order to effectively capture the intellectual property’s monetary worth. Understanding the potential impact of the COVID-19 pandemic may prove beneficial, if not crucial, in determining an intellectual property asset’s value.

Footnotes:

1: As defined here, intellectual capital refers to the intangible value of a business that is not listed on the balance sheet including but not limited to human capital, relational capital, and intangible structural capital.

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