Intellectual Property

Russell L. Parr, CFA, ASA is President of Intellectual Property Research Associates (www.ipresearch.com). He is an expert in determining the value of intellectual property. Mr. Parr's books about intellectual property value and management are published in Japanese, Korean, Italian and English. He is dedicated to the development of comprehensive methods for accurately defining the value of intellectual property.

PREFACE xvii PART I VALUATION 1 CHAPTER 1A INTELLECTUAL PROPERTY LANDSCAPE (NEW) 3 1A.1 80% of Corporate Value Is Intellectual Property and Intangible Assets 4 1A.2 Over Seven Million Patents 6 1A.3 Corporations Own the Most Patents 7 1A.4 All Industries Are Patenting Inventions 8 1A.5 Trademarks 10 1A.6 Trademarks Are Supported with Huge Ad Spending 11 1A.7 Copyrights 12 1A.8 Trade Secrets 12 1A.9 Business of Licensing 15 CHAPTER 1B U.S. CONGRESS FLIRTS WITH DISASTER (NEW) 25 1B.1 Patent Litigation Venue 27 1B.2 Patent Infringement Damages 27 1B.3 Injunctions for Only Competitors 29 1B.4 Harming Our Only Economic Advantage 31 CHAPTER 12A RISK-ADJUSTED CASH FLOWS (NEW) 32 12A.1 Required Rates of Return 33 12A.2 Capital Asset Pricing Model 36 12A.3 Build-Up Method 41 12A.4 Venture Capital Rates of Return 42 12A.5 Probability of Success 45 12A.6 Conclusion 49 CHAPTER 12B DEALING WITH RISK AND UNCERTAINTY IN INTELLECTUAL PROPERTY VALUATION AND EXPLOITATION (NEW) 51 12B.1 Risk versus Uncertainty 53 12B.2 Decision Analysis and Decision Trees 55 12B.3 Decision Tree Components and Conventions 56 12B.4 Monte Carlo Techniques 63 12B.5 Markov Chains 66 12B.6 Obtaining Information from Indirect Observation: Shadow Pricing 70 12B.7 Bayesian Analysis 72 12B.8 Option Pricing Models 75 12B.9 Limitations on Rationality in Decision Making: The Effects of Perception and Biases on Decision Making 78 12B.10 Conclusion 79 CHAPTER 14A RIGHTS OF PRIVACY, PUBLICITY, AND CELEBRITY PERSONA (NEW) 81 14A.1 Introduction 81 14A.2 Legal Underpinnings 84 14A.3 Trademark Rights 87 14A.4 Copyright 88 14A.5 Legal Uncertainties and Solutions 90 14A.6 A Photography Issue 91 14A.7 Conclusion 93 CHAPTER 14B INTELLECTUAL PROPERTY AND INTANGIBLE ASSET VOLATILITY (NEW) 95 PART II LICENSING 101 CHAPTER 27A ROYALTY RATES AND LICENSE FEES FOR TECHNOLOGY (NEW) 103 27A.1 Royalty Rates 104 27A.2 Per Unit Royalties 107 27A.3 Royalties Based on Profitability 108 27A.4 License Fees 109 27A.5 Medical Device Industry Royalty Rates 111 27A.6 Medical Device Industry License Fee Distribution 112 27A.7 Conclusion 114 CHAPTER 27B LICENSE FEES AND ROYALTY RATE FREQUENCY FOR TECHNOLOGY (NEW) 115 27B.1 Real Deal Royalty Rates 116 27B.2 Per Unit Royalties 118 27B.3 License Fees 119 27B.4 Conclusion 120 CHAPTER 27C ROYALTY RATES AND LICENSE FEES FOR PHARMACEUTICALS AND BIOTECHNOLOGY (NEW) 121 27C.1 The Parties Licensing between Corporations Dominates 122 27C.2 Royalty Rates 122 27C.3 License Fees 124 27C.4 Key Technologies 125 27C.5 Developmental Stages of Technology 126 27C.6 Conclusion 128 CHAPTER 33A THE MAGNITUDE AND MEANING OF ROYALTY MISREPORTING (NEW) 129 33A.1 Introduction 129 33A.2 Why? versus How? 130 33A.3 Math Errors: 5% Error Rate 133 33A.4 Royalty Rate Errors: 4% Error Rate 134 33A.5 Transfer Prices: 4% Error Rate 136 33A.6 Unreported Benchmarks and Milestones: 5% Error Rate 137 33A.7 Unreported Sales: 16% Error Rate 138 33A.8 Disallowed Deductions: 9% Error Rate 138 33A.9 Unreported Sublicenses: 17% Error Rate 139 33A.10 Questionable License Interpretation: 40% Error Rate 139 33A.11 Conclusion 140 CHAPTER 33B INTELLECTUAL PROPERTY AUDIT AND MANAGEMENT (NEW) 141 33B.1 Introduction 142 33B.2 Intellectual Property Is Important 142 33B.3 But Intellectual Property Is Frequently Mismanaged 143 33B.4 Why the Intellectual Property Dichotomy? 143 33B.5 The First Step: An Intellectual Property Audit 144 33B.6 From IP Audit to IP Management 146 33B.7 Insuffi cient Approaches 147 33B.8 A New Intellectual Property Management Paradigm 148 33B.9 Available Tools 148 33B.10 Benefi ts of Intellectual Property Management 149 33B.11 When to Do an Intellectual Property Audit 150 33B.12 How to Do an Intellectual Property Audit 152 33B.13 Software Solutions to Make the Job Easier 155 33B.14 Conclusion 158 CHAPTER 35A QUANTIFYING REASONABLE ROYALTIES: THE ENTIRE MARKET VALUE RULE (NEW) 163 CHAPTER 45 NEW MEASURE OF INFRINGEMENT DAMAGES FUTURE DAMAGES (NEW) 175 45.1 Royalty Rate for Future Damages 177 45.2 What About Future Lost Profi ts? 188 CHAPTER 45A CONTINUALLY EVOLVING PATENT DAMAGES (NEW) 189 45A.1 Post-Verdict Royalty Rates 190 45A.2 Optimize Your Patented Technology or Lose It 195 45A.3 Litigation-Based Licenses 198 CHAPTER 45B THE 25% RULE IS DEAD (NEW) 203 APPENDIX G MORE SAMPLE ROYALTY RATE INFORMATION (NEW) 207 APPENDIX H TRADEMARK ROYALTY RATES (NEW) 235 APPENDIX H-A MORE TRADEMARK AND COPYRIGHT ROYALTY RATES (NEW) 253 APPENDIX I PHARMACEUTICAL AND BIOTECHNOLOGY ROYALTY RATES (NEW) 291 APPENDIX J TELECOMMUNICATIONS ROYALTY RATES (NEW) 315 APPENDIX K ELECTRICAL AND ENERGY ROYALTY RATES (NEW) 351 INDEX 385