Valuing IP And Intangible Assets – A Litigator’s View

Michael D. Moberly   October 15, 2009

Some intellectual property litigators are taking the position, as reported in CFO Magazine recently, that there are potential ‘perils’ if/when company’s assign a specific dollar value to their IP or other intangible assets and report same on their balance sheet.

To illustrate this position, suppose, for example, an ‘on the shelf’ patent a company holds rightful ownership to, but is not utilizing, is valued at $50,000 and is reported as such on the company’s balance sheet.

Then, let’s suppose the company learns that their ($50,000) patent is being infringed, i.e., an adversary has created, marketed, and is selling a product that’s achieving $500 million in annual sales that’s literally underpinned by the infringed IP.   According to some IP litigators, this could present a dilema should the rightful patent holder elect to legally pursue the infringer, which, of course, they have an obligation to do if they wish to retain the rights to that patent.   In other words, patent holders cannot ‘cherry pick’ the infringers they will (legally) pursue.

The dilema, should the matter proceed to court, is that the patent holder and their counsel may find it challenging to frame – present a credible (sympathetic) argument that their patent is now (suddenly, post infringement) worth much more than its initial $50,000 valuation relative to the $500 million in annual sales the adversary/competitor has allegedly developed by exploiting the infringed IP.

Any inference that this example should serve as a rationale – justification for company’s, management team’s, and board’s to push back from their fiduciary responsibility to (a.) fully utilize their intangible assets, and (b.) sustain (preserve) control, use, ownership, and monitor the value of their intangible assets would surely be shortsighted. 


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