Cash in on in­tel­lec­tual prop­erty

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW -

in­stances the val­u­a­tions are used in sim­ply at­tribut­ing a value to in­tel­lec­tual prop­erty for the pur­poses of a trans­ac­tion or trans­fer pric­ing. South African com­pa­nies are also look­ing more ac­tively at is­sues such as in­tel­lec­tual prop­erty hold­ing struc­tures and the ben­e­fits that these can of­fer. Fi­nan­cial rea­sons. It is not un­com­mon for com­pa­nies to use in­tel­lec­tual prop­erty for the pur­poses of rais­ing cap­i­tal or se­cur­ing debt. Us­ing in­tel­lec­tual prop­erty to raise cap­i­tal or se­cure debt is not new, even in SA where a num­ber of com­pa­nies have bun­dled to­gether port­fo­lios of in­tel­lec­tual prop­erty, typ­i­cally trade­marks, for these pur­poses.

Less com­mon though is the use of royalty in­come as a ba­sis to is­sue bonds. The most prom­i­nent ex­am­ple of this is the now fa­mous “Bowie Bonds” where the royalty stream that was flow­ing from David Bowie’s mu­sic rights was used as se­cu­rity to is­sue bonds. Le­gal rea­sons. In ad­di­tion to strate­gic, trans­ac­tional, tax and fi­nan­cial rea­sons, val­u­a­tions of in­tel­lec­tual prop­erty may also be re­quired for le­gal rea­sons.typ­i­cal ex­am­ples of this are con­duct­ing val­u­a­tions for the pur­poses of de­ter­min­ing dam­ages or rea­son­able roy­al­ties that are to be paid in lieu of dam­ages. Dam­ages aim to com­pen­sate a plain­tiff for the eco­nomic loss that the in­tel­lec­tual prop­erty holder has suf­fered as a re­sult of the unau­tho­rised use of in­tel­lec­tual prop­erty.

The eco­nomic ben­e­fit that has been de­nied to the holder of in­tel­lec­tual prop­erty needs to be quan­ti­fied.

In­tel­lec­tual prop­erty val­u­a­tion is be­com­ing more com­mon­place as com­pa­nies look to ex­tract value from and recog­nise the value of their in­tel­lec­tual prop­erty. There is also a grow­ing recog­ni­tion that these as­sets hold sub­stan­tial value but that spe­cial­ist skills are re­quired for the man­age­ment and val­u­a­tion of these as­sets.

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