Intellectual property valuation.
Date: 2023-09-07
Institutions: European Innovation Council and SMEs Executive Agency
Subjects: intellectual property, qualitative analysis, quantitative analysis, small and medium-sized enterprises

FACT
SHEET

Intellectual Property Valuation 

www.ec.europa.eu/ip-helpdesk

Summary

I. Introduction 

II. Why you should care about intellectual property valuation 

III. Who should be involved in the evaluation 

IV. How is valuation performed ? 

1. Quantitative approach 

2. Qualitative approach 

V. Selecting the right method  

VI. Useful Resources 

April 20231  

3

4

6

7

8

10

11

12

1 This fact sheet was first published in June 2013 and updated in April 2023.

2

European IP HelpdeskFact Sheet 
 
I. Introduction

Intellectual property (IP) assets such as patents, trademarks, copyrights or trade secrets are 
increasingly the core of many organisations and transactions. Licensing and assignments of 
corresponding IP rights are common, and the use of these types of assets as loan security has 
grown. Hence the growing importance of the valuation of intangibles: trading an asset requires 
knowing its value.

Several  methodologies  are  commonly  used  on  the  market  to  value  these  assets.  This  fact 
sheet  will  explain  the  different  methods,  and  examples  of  possible  use  scenarios  of  these 
methodologies are given. Different tools have been created by public organisations to assist 
companies in performing valuations. These free tools will also be presented in this document to 
help you save time and money. However, it has to be underlined that it is always recommended 
to consult an IP lawyer or IP valuation professional to ensure that the right method is chosen 
and applied correctly.

3

European IP HelpdeskFact SheetII. Why you should care about intellectual property valuation

The  valuation  of  IP  rights  is  part  of  good  IP  management  practices  within  an  organisation. 
Indeed, knowing the economic value and importance of your organisation’s IP rights is key to 
the strategic decisions to be taken on your assets. Still, it also facilitates transactions and the 
commercialisation of your IP rights. 

There are many business situations where valuation is required, such as:

a.  Valuation of a company for a merger, acquisition, joint venture or bankruptcy:  

Companies are increasingly based on intangible assets and investment in R&D and 
knowledge. As expenditures in intangibles rise, so does the share of intangible assets 
in a company’s value and on the market as a whole2. Therefore, to know the value of a 
company, it is essential to know the value of its IP.  

b.  Technology transfer, e.g., assignment or licensing of IP rights: 

As in other business transactions, organisations negotiating agreements to sell or 
license IP rights commonly have to agree on a price. Knowing the value of the IP right is 
essential to reaching such an agreement and ensuring the parties engage in a good deal. 

c.  Support in situations of conflict, such as court proceedings or alternative dispute 

resolution mechanisms (such as arbitration and mediation): 
In conflict scenarios, quantifying damages is often a necessary step of the process. 
Therefore, the correct valuation of the IP right at stake is essential to guarantee a fair 
recovery of the damages.  

d.  Fundraising through bank loans or venture capital:  

The valuation of the IP to be used as security for bank loans or to attract venture capital 
and investors is essential. Indeed, several studies reveal that, in particular, owning 
patents and having proper IP management structures in place plays a crucial role in the 
decision of venture capitalists3. 

e.  Assisting internal decision-making: 

Valuation also plays a role in decisions concerning the protection strategies and 
country selection for registration of IP rights and can assist organisations in identifying 
weaknesses such as ownership uncertainties, which may have an impact on the value of 
the IP and on decisions for the exploitation of such assets.  

2  ICC, Handbook on Valuation of Intellectual Property Assets, 2019 
3   Kamiyama, S., J. Sheelan and C. Martinez (2006), “Valuation and Exploitation of Intellectual Property”, OECD, Technology 

and Industry Working Papers, 2006/085, OECD Publishing. 

4

European IP HelpdeskFact Sheet 
 
f.  For accounting and taxation purposes. 

Organisations are required to report on their assets, including their intangible assets. 
Valuation is, therefore, a necessary step, as well as in situations of tax planning involving 
IP. 

Defining the objectives and context of the valuation is essential since it determines the strategy 
and the type of valuation method(s) that should be used. Hence, this is the first step to take 
when performing a valuation.

5

European IP HelpdeskFact SheetIII. Who should be involved in the valuation 

IP valuation can be performed in-house or outsourced to a professional entity. If performed 
in-house, organisations must be aware that this should be a team effort involving several staff 
members with legal, technical, financial, marketing and strategic expertise.

Tip: if engaging with the services of an external entity to perfom the valuation of your 
intellectual property, do not forget to have confidentiality obligations in place to protect 
your business infrmation

Several national IP offices in the European Union and other public organisations have created 
free  tools  to  assist  particular  SMEs  in  performing  basic  valuation  in-house.  Here  are  two 
examples: 

√ IPscore 

IPscore is a unique evaluation tool developed by the European Patent Office (EPO) to evaluate 
patents and technological development comprehensively. It is a simple, user-friendly tool that 
can be used by all companies that have a portfolio of patents and development projects4. 
It provides: 

•  basis for identifying the conditions that create value for the patent or development project. 
A strong evaluation profile, with tried and tested assessment factors and new reports, 
provides a comprehensive evaluation of the various conditions determining the value of a 
patent or development project. 

•  basis for assessment and valuation of the patent or development project. A quantitative 
financial module works out a financial forecast and determines the financial order of 
magnitude in the overall qualitative evaluation.

√ IP Panorama 2.0 

IP PANORAMA 2.0 was developed jointly by the Korean Intellectual Property Office (KIPO), the 
Korea Invention Promotion Association (KIPA), and the World Intellectual Property Organization 
(WIPO). It consists of a set of e-learning modules (20 hours), one dedicated to the valuation of 
IP assets5. It provides information on topics such as:

the relevance of IP and IP rights to a business;

• 
•  different forms of IP and IP rights;
• 
formulating your IP strategy; and
•  growing and scaling business through ongoing IP management and utilisation.

4 The IPscore is available at the European Patent Office: https://www.epo.org/searching-for-patents/business/ipscore.html 

5  The IP Panorama 2.0 is available at the World Intellectual Property Office: https://www.wipo.int/academy/en/news/2022/

news_0029.html

6

European IP HelpdeskFact SheetIV. How is the valuation performed? 

•  Organisations use different approaches to IP valuation. Generally, these approaches are 

divided into two categories: quantitative and qualitative valuation.

•  While the quantitative approach relies on numerical and measurable data to calculate the 
economic value of IP, the qualitative approach focuses on the analysis of the characteristics 
(such as the legal strength of the patent) and uses of IP6. 

Several methodologies are used within the quantitative approach, but they can generally be 
grouped into four methods7:  

1.  cost-based method;
2.  market-based method;
3.  income-based method; and 
4.  option-based method.

6   Lagrost, C., D. Martin, C. Dubois and S. Quazzotti (2010), “Intellectual property valuation: how to approach the selection of an 

appropriate valuation method”, Journal of Intellectual Capital, vol. 11 n. 4, Emerald Group Publishing Limited.

7  Flignor, P., D. Orozco “Intangible Asset & Intellectual Property Valuation: A Multidisciplinary Perspective”, 2006

7

European IP HelpdeskFact Sheet1. Quantitative approach 

1.1 Cost-based method  

This method assumes that there is a direct relation between the costs expended on the 
development of IP and its economic value. 

Different techniques are used to measure costs, such as:
i.  Reproduction cost method: Estimations are performed by gathering all costs associated 
with purchasing or developing a replica of the intellectual property under valuation. 
ii.  Replacement cost method: Estimations are performed based on the costs that would be 

spent to obtain an equivalent IP asset with similar use or function.  

In both methods, we consider today’s price, i.e., the expenditures as of the valuation date 
and not the historical costs when these were actually incurred8. Costs of two sorts should be 
included: 
a.  direct expenditures, such as costs of materials, labour and management; and 
b.  opportunity costs relating to the lost profits due to delays in the market entrance or 

investment opportunities lost to develop the asset9.

1.2 Market-based method  

The market-based valuation method relies on estimating value based on similar market 
transactions (e.g., similar licence agreements) of comparable IP rights. Given that often 
the asset valuated is unique, the comparison is performed in terms of utility, technological 
specificity and property, also considering the market‘s perception of the asset. 
Data on comparable or similar transactions may be accessed in the following sources:  

a.  annual company reports
b.  specialised online databases and services such as:  

•  Royalty Source - Intellectual Property Valuation and Licensing: www.royaltysource.
com;   
•  Royaltystat: www.royaltystat.com  
•  Knowledge Express: https://knowledge.express  
• 
•   etc. 
from publications and organisations dedicated to licensing and royalties, such as the 
Licensing Executives Society: https://www.lesi.org/  

ktMINE: www.ktmine.com;  

c. 

d.  in court decisions concerning damages

8  Drews, D., ”The Cost Approach to IP Valuation: Its Uses and Limitations”, IP Metrics Intellectual Property Valuation, 2001.

9  Flignor, P., D. Orozco “Intangible Asset & Intellectual Property Valuation: A Multidisciplinary Perspective”, 2006

8

European IP HelpdeskFact Sheet1.3 

Income-based method 

This method tends to be the most frequently used10. It is based on the principle that the 
value of an asset is intrinsic to the (expected) income flows it generates. After the income 
is estimated, the result is discounted by an appropriate discount factor to adjust it to the 
present circumstances, thus determining the IP‘s current value. 

There are different methods of calculation of the future cash flows, such as:  

Discounted cash flow method: This method aims to estimate future cash flows, which 

i. 
are projected and later discounted by applying an appropriate discount factor. The primary 
source of information to estimate the cash flows is generally the company’s business plan 
that exploits or intends to exploit the asset. 
ii. 
Relief-from-royalty method: In this method, the value of the asset is considered as the 
value of the royalty payments from which the company is relieved due to its ownership of the 
asset. Hence, the appropriate royalty rate must be determined, allowing the estimation of the 
future royalty income stream. A discount rate is applied to determine the present value of the 
asset. 

1.4 Option-based method 

Differently from the other methods, the option methodology takes into consideration the 
options and opportunities related to the investment11. It relies on option pricing models (e.g., 
Black-Scholes) for stock options to achieve a valuation of a given IP asset.

10  ICC, Handbook on Valuation of Intellectual Property Assets, 2019

11  Kamara, A., “Introduction to real options”, CFO Forum, 2002. 

9

European IP HelpdeskFact Sheet2. Qualitative approach  

This method, also commonly referred to as evaluation, does not rely on analytical data. In 
fact, the valuation in this method is performed by analysing different indicators to rate the IP 
right, i.e., determining its importance.  

The indicators cover all the aspects that can impact an IP asset’s value, including legal 
aspects, the technology level of the innovation, market details and company organisation. 
The method is commonly implemented through a questionnaire comprising all these criteria. 
Examples of questions included in such questionnaires can be:

√ 

√ 

√ 

How would you define the IP innovation compared to the actual state of the art? 

Which level of its life cycle has the IP right (e.g., patent) reached? 

What is the geographic coverage of the reference market? 

10

European IP HelpdeskFact SheetV. Selecting the right method

Selecting the most appropriate valuation method in a given situation is complex. The 
procedure should consider several factors, such as the type of IP at stake, the technology’s 
development level, and the valuation’s purpose.

The advantages and disadvantages of each methodology should also be weighed up. There 
is no specific rule on this matter. However, there are some situations where certain methods 
are more likely to be used, even though, in theory, all methods may be applied. For these 
reasons, and as mentioned at the beginning, it is always advisable to consult an IP lawyer or 
IP valuation professional to choose the most suitable method and apply it correctly.

In the table below, you will find scenarios where methods are more likely to be used. 

11

European IP HelpdeskFact SheetVI. Useful Resources 

For further information on the topic, please also see:  

•  WIPO, Valuing intellectual property assets

•  European IP Helpdesk webinar on  

“IP assessment: how to improve informed decision-making” 

•  EUIPO, Why IP valuation matters

• 

ICC, Handbook on the Valuation of IP Assets

•  OECD, Intellectual Property Statistics and Analysis

12

European IP HelpdeskFact SheetOur main goal is to support cross-border SME and research activities to manage, 
disseminate and valorise technologies and other IP rights and assets at an EU level. 
The European IP Helpdesk enables IP capacity building along the full scale of IP 
practices: from awareness to strategic use and successful exploitation. 

HELPLINE
Our Helpline team 
answers your 
individual IP questions

WEBSITE
The heart of our service 
portfolio to keep 
you updated

TRAINING
Gain IP knowledge in our 
free online and on-site 
training sessions

EVENTS
Meet us at key  
networking and brokerage 
events and conferences

AMBASSADORS
Our regional ambassadors 
provide IP support 
throughout Europe

PUBLICATIONS
Detailed IP knowledge 
provided through our 
high level publications

Get in touch with us.
European IP Helpdesk
c/o Eurice GmbH
Heinrich-Hertz-Allee 1
66368 St. Ingbert, Germany
Web www.ec.europa.eu/ip-helpdesk 
Email service@iprhelpdesk.eu
Phone  +34 965 90 9692 (Helpline)

assets. 

Disclaimer

The European IP Helpdesk provides free-of-charge first-line support on 
IP-related issues aiming to help current and potential beneficiaries of EU-
funded projects, as well as EU SMEs, manage their Intellectual Property 
The European IP Helpdesk is managed by the European Commission’s 
European Innovation Council and SMEs Executive Agency (EISMEA), 
with policy guidance provided by the European Commission’s Directorate-
General for Research and Innovation (DG RTD).
The information provided by the European IP Helpdesk is not of a legal 
or advisory nature and no responsibility is accepted for the results of 
any actions made on its basis. Moreover, it cannot be considered as the 
official position of EISMEA or the European Commission. Neither EISMEA 
nor the European Commission nor any person acting on behalf of 
EISMEA or of the European Commission is responsible for the use which 
might be made of this information.
Reuse is authorised provided the source is acknowledged.
© European Union, 2023 
Luxembourg: Publications Office of the European Union, 2023
PDF: ISBN 978-92-9469-586-4   DOI 10.2826/1129   EA-03-23-335-EN-N

13

European IP HelpdeskFact Sheet