A franchise agreement may involve the transfer of a trademark or trade name and the associated trade secrets, such as recipes and formulas, in return for some control over use and a percentage of the new owner s profits, or some other arrangement. An owner of intellectual property who chooses to engage in a strategic partnership may lack some of the resources needed to fully exploit the property. He or she then aligns the company with a complementary business possessing the needed resources. Together, the two companies thus are able to obtain the full benefits of the property. The value of both intellectual property and the underlying business depend on the potential uses as well as the current uses of the property.
Valuators can use several methods to determine the value.
In an active market with existing past arm s-length transactions of comparable property and access to pricing information, a valuator can determine the value of intellectual property by comparing the prices at which similar property has changed hands between willing buyers and sellers. However, determining comparability among intellectual properties can be difficult. Even similar trademarks in the same industry may not have the same value due to differing profitability levels. These are just a few items to consider if you are attempting to ascertain the arm s-length value of your intellectual assets, whether for transfer purposes or simply as part of a larger sale of your business. Obviously, each case requires attention to its particular circumstances.