What is Intellectual Property? > Study Aids > Commercialisation and Valuation of Intellectual Property (Copyright and Trade Marks)

Commercialisation and Valuation of Intellectual Property (Copyright and Trade Marks)

This article explains that in the digital age, intellectual property rights (especially copyright and trade marks which are by nature informational) can be commercially exploited in the e-commerce environment. Thus valuation of intellectual property should take into consideration the return from this additional cyber dimension.

 

One beautiful aspect of copyright protection is that there is no formality and therefore no registration is required. Protection is international. Similarly, for trade marks for goods and services, registration is not a must in order to get protection, although registration entails additional protection. Protection of well-known marks could be international. The purpose of this article is to discuss briefly the additional benefits that can be derived through commercialisation of copyright and trade mark articles in the cyberspace and irrespective of the valuation methods one choose, the return from the additional cyber dimension should also be taken into account.

ANALYSIS: Characteristics of informational intellectual property such as copyright and trade marks?

Works protected by copyright are largely informational. Literary, musical, dramatic, artistic works, sound recordings, films, wireless radio and television broadcast, cable radio and television diffusion are all informational. In the modern development of information technology, a majority of copyright subject matters and trade marks can be transposed into strings of digital zeros and ones, manifesting themselves electronically in computer monitors.

Goods manifesting intellectual property (such as computer software, sound recordings, films and database) and their trade marks can be distributed and paid via the INTRANET or INTERNET, convenient and quick.

The information super-highway has provided conditions for information-based intellectual property items to break the traditional territorial frontiers.

COMMERCIALISATION

The traditional ways of commercial exploitation of copyright such as publishing, reproduction, distribution can now be done in an integrative manner via the INTERNET. Apart from its ease, efficiency and comparatively low cost, the medium has broadened the horizon of the market place.

Trade marks for goods and services can also be merchandised in a lively and appealing manner through digital devices (eg virtual characters) . Or they may be exploited through generic and descriptive words or numbers (such as xyz.com.cn) that are possible in the field of domain name registration.

VALUATION

When valuing intellectual property, one has to take into consideration general valuation principles such as the highest and best use, supply and demand and profit expectation. The main methods include the following-

(1) Market method

The ideal situation is for the willing purchaser and seller to agree on the market price of the intellectual property in question, taking into consideration comparables. However, due to the uniqueness and novelty of the subject matter, there is hardly such an active market.

(2) Cost approach

This approach assumes that there is a correlation between commercial value of intellectual property and the cost of its research and development. This valuation method takes into account the costs of (1) research and development, (2) promotion, and (3) depreciation/appreciation. The method is relatively simple, but its down side is that the commercial value of intellectual property does not necessarily have any bearing on input costs.

(3) Options based on estimated future economic value

The general principle is to estimate the economic benefit that might derive from that item of intellectual property during the protection period, less the input costs and other quantifiable calculated risks. When using this method, it might be instructive to note the following factors: (1) the extent of protection among different categories of intellectual property rights is different, (2) whether the costs of failures during research and development stage should be taken into account and (3) whether the subjective expectation on its value is a relevant valuation criterion.

For example: 25% Rule

This is a simple and direct method. This rule assumes that the licensee generally agrees to pay 25% of the economic benefits that can be derived from the commercial exploitation of an identified intellectual property subject matter. However, due to the many trade secrets involved in commercial transactions and the different accounting principles that could be based, it is very difficult to secure the relevant data to make a good estimate. In any case, this rule could be a good starting point of any consultation or negotiation for intellectual property licensing.

The cyberspace is forever expanding. Its impact on copyright and trade marks is great. Irrespective of the choice of intellectual property valuation method one chooses, it is imperative that the economic benefits that might be derived in the cyberspace should also be taken into account.

CONCLUSION

With the advance of information technology and its general accessibility, commercialisation and valuation of intellectual property especially for copyright subject matters and trade marks are undergoing an economic revolution - in the digital world that does not differentiate North and South, or sovereign and regional territories.