An in-depth study of intellectual property (IP) valuation using both market and accounting data

Corporate success is to a large extent based on innovation, and as a result, so is our economy’s. To both stimulate and protect inventions patents are issued which exclude others from making, using, selling, or importing an invention for a limited period of time. Patents are intellectual property (IP) that need to be valued for accounting, tax, litigation, and contracting purposes. However, valuing patents is often quite complex and it requires a mixture of expertise including input from accountants, lawyers, and engineers. In this project, we aim to significantly enhance the explanatory power of patent valuation models by studying both the value relevance of intrinsic as well as extrinsic patent value drivers. In particular, our objectives are 1) to investigate intrinsic value drivers of individual patents using market data (patent prices); 2) to execute an in-depth study of the effect of claim characteristics on patent prices; 3) to study the effects of market conditions on patent valuation; 4)to examine intrinsic value drivers of the accounting valuation of patent portfolios (at firm level); 5) to investigate whether such accounting valuations of patent portfolios are informative of the (underlying) economic value of the patent portfolio and finally, 6) whether characteristics of the external verification of the accounting valuation of patent portfolios affects its information value. Upon realization of the project, we also aim at developing a patent valuation model that is useful for patent valuation practice.