VALUATION Corp. Provides Professional Valuation of Patents for Inventions, Utility Models, Industrial Designs and Selection Achievements in Russia
- Valuation Subject
- Approaches to Patent Valuation in Russia
- Our Services
- Information and Documents for Patent Valuation
In Russia patent is a document issued by the Federal Service for Intellectual Property (ROSPATENT) certifying priority, authorship and exclusive right to an invention, utility model or industrial design. Patents for selection (breeding) achievements are issued by Ministry of Agriculture of the Russian Federation.
According to the Russian law, for various types of patentable IP the duration of patent also varies as follows:
- patent for invention – issued for 20 years and cannot be prolonged;
- patent for utility model – issued for 10 years and cannot be prolonged;
- patent for industrial design – initially issued for 5 years then can be prolonged every 5 years, but total patent’s duration is limited to 25 years;
- patent for selection (breeding) achievement – issued for 30 years and cannot be prolonged.
Since patent is only a document certifying the rights of the patent holder to a particular IP object, so, strictly speaking, it cannot be a valuation subject. When we mention “patent valuation”, in the strict legal sense we mean that the subject of valuation is the exclusive right (see the definition of the exclusive right in Russia) to a particular object of intellectual property protected by this patent.
Though not entirely correct, the term “patent valuation” has become firmly rooted in casual business speech circulation, so here we will use it, meaning that the valuation subject in this case is the exclusive right to invention, utility model or industrial design that the patent protects.
In case of valuation of a specific set of rights, different from the exclusive right to the patented IP, usually the term “license valuation” is used.
- ability to create new goods or give existing goods new properties;
- ability to lower production costs of goods (services);
- ability to expand sales of goods (services) onto new markets.
Most often, valuation of patents in Russia is conducted using the income approach to appraisal.
The main advantage of income approach is that its methods allow calculating the value of the subject patent based on potential income that the patent holder can receive from using his patented intellectual property, thus connecting the patent’s economic benefits (commercial effectiveness) and its market value.
Applicability of comparative (market) and cost approaches to patent valuation in Russia is very limited.
Comparative (market) approach, based on a comparison of the subject patent to its recently sold analogues whose price is known, is almost never used because the IP market in Russia is rather non-transparent and information on patents transactions is almost always closely held and difficult to access.
Cost approach, based on calculating reproduction cost of an object, is generally ineffective for valuation of patents, because the market value of a patent is often rather weakly connected with the costs of IP development and commercially successful IP objects are often made with very modest budgets. The main applications of cost approach to patent valuation in Russia are for accounting, notarial and taxation purposes.
Our firm provides professional services for independent valuation of patents for inventions, utility models, industrial designs and selection (breeding) achievements.
We have more than 20 years of experience in valuation of intellectual property in Russia for various purposes including:
- contribution of an IP object to charter fund (shareholders’ capital) of Russian legal entity;
- determination of the fair transaction price when buying/selling an IP object;
- determination of initial book value of patented IP object for accounting purposes;
- revaluation of the book value of an IP object for accounting purposes;
- independent confirmation of the market value of an IP object for potential investors;
- transfer of the exclusive right to patented IP object as a collateral;
- determination of fair market amount of royalties for using patented intellectual property under license agreement;
- calculation of damages from unauthorized use of patented IP.
The following documents and information are usually required for patent valuation:
- copy of the patent;
- description of an invention or other IP object protected by the patent;
- information about the rights of third parties in relation to a patent (licensing agreements, copyright agreements, etc. - if any);
- information about the initial and residual book value of patented IP object (if patent holder is a legal entity and patented IP is part of its intangible assets);
- description of patented IP actual or potential commercial usage;
- description of possible economic benefits from use of the subject IP;
- quantitative data characterizing the economic benefits of using patented IP object, for example:
- cost advantage - reduction in the cost of production of goods (services);
- gain in productivity - increase in production volume of the enterprise while maintaining same costs;
- gain in quality - improving quality of products, which allows to increase the price per unit and/or increase the total volume of sales;
- possibility of saving on capital investments;
- other possible economic benefits.
- quantitative data on annual revenues received from sales of goods (services) produced using the subject IP for the past 3-5 years - nomenclature of goods (services), unit price and total sales volume by each year;
- proceedings from sales of licenses to use patented IP (if any);
- business plan for the commercial use of the subject patented IP for the next 3-5 years (if the subject IP is not used commercially so far and only is planned to be used).
Depending on the purpose of valuation and other factors, the above list of information and documents, in accordance with the nature of the subject IP, may be reduced or expanded after our detailed review of the valuation assignment.
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