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Value and price of IPR

15 February 2024

Experts agree that the valuation of Industrial Property Rights (IPR) results from an opinion-giving process. Similarly, there is no dispute regarding the general definition of value as a summary assessment of future financial benefits from owning or using IPR determined by considering the risk. Value is inherently subjective, as an opinion expressed by a specific entity. Price/cost is an existing or future market fact that has a significant causal relationship with demand and supply and, at the same time, is the result of a decision with a relationship with a value that is difficult to establish, mainly due to the multitude of factors taken into account in the decision-making process of the buyer/user.

The information function of the concluded transaction prices is a valuable source for the opinion-forming (valuation) process. However, in the case of IPR valuation, price comparison analysis poses unique difficulties due to the distinctive features of the invention, brand and other items protected by IPR. In the common opinion, the price/cost formed due to market transactions should correspond to the value (e.g. in the market value standard), but this view does not work in practice. Even in the case of liquid capital instruments in economic transactions (e.g. shares of listed companies), the price usually deviates from the intrinsic value, which in turn differs significantly in the opinion of various recognized experts. Experts have been focusing on the standardization of valuation methods for many years, which should reduce the diversity of valuation results by creating a common methodological point of reference (e.g. the IVSC (International Valuation Standards Council) organization has gained global reach, supporting the progress of the process of standardization of valuation methods).

In the case of IPR valuation, reliable use of the information function of transaction prices requires access to commercial databases. However, this information is relatively rare and incomplete due to the confidential nature of the transaction.

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