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May ABI Journal Article Provides Factors to Consider When Valuing a Debtor Company's Intellectual Property

Alexandria, Va. — For many corporate debtors, intellectual property may be the company's most valuable asset, and thus stakeholders and counsel must know the key measures of IP value, according to an article in the May edition of the ABI Journal. “A valuation analyst might be asked to value the IP of a debtor company in bankruptcy for various litigation or other controversy-related purposes,” writes Commission Reporter Prof. Robert F. Reilly of Willamette Management Associates (Chicago) in his article “A Debtor Company’s IP Valuations.” “In addition, the analyst may be asked to value the debtor company’s IP for various transaction, taxation, financing or other purposes.”

 

Reilly said that a valuation analyst may define the debtor’s IP to broadly include the company’s patents, trademarks, copyrights and trade secrets, as well as any associated intangible assets. “In order for a valuation analyst to quantify the debtor company’s IP value, the IP should provide, or have the potential to provide, a competitive advantage or a product differentiation,” Reilly writes. Some of the attributes of the debtor company’s IP to consider include:

  • Property rights related to the debtor’s IP
  • Operational or economic benefits of the IP
  • Current utility of the debtor’s IP
  • IP being owned or operated as a standalone asset
  • Life cycle of the IP, company and industry

 

Numerous factors may also affect the debtor company’s IP value, according to Reilly. “Industry, product and service considerations may provide a wide range of positive and negative influences on IP value,” Reilly writes. Some of the factors that a valuation analyst should consider in the valuation process include:

 

  • Legal rights associated with the debtor’s IP
  • Industry in which the IP is used
  • IP’s economic characteristics
  • Reliance of the IP owner/operator on tangible assets or other intangible assets
  • Expected impact of regulatory policies or other external factors on the commercial viability or marketability of the IP

 

To obtain a copy of “A Debtor Company’s IP Valuations,” published in the May issue of the ABI Journal, please contact John Hartgen at 703-894-5935 or via email at jhartgen@abi.org. Additionally, ABI's Bankruptcy and Its Impact on Intellectual Property Law, Second Edition, provides further insight into the issues related to IP valuation and bankruptcy; visit www.abi.org/bookstore.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/calendar-of-events.