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IP Patent and Valuation Model Tool

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IP Patent and Valuation Model Tool Powered By Docstoc
					       Intellectual property valuation model
                                          (Simple)

                                               By

                                       MyPatent
                                (www.mypatent.co.za)

                                Subject to disclaimers
For valuation services using our proprietary comprehensive model, please contact www.zaiplaw.co.za

                                                             © MyPatent, Intangible Consulting (Pty) Ltd,
                                                      2007
Company:                   XYZ Co                                                            Disclaimer:                                                                            1
Asset:                     Trademark                                        Zero everything  This is a free valuation tool. MyPatent does not confirm the correctness of the inputs or the appropriateness of this valuation methodology
Base date:                 Dec-08                                                            The public is free to use this model at their own risk and no reliance is placed upon MyPatent
Currency                   Rands                                                             The valuation determined using this model is not endorsed by MyPatent
                                                                                             This is a basic valuation model. Various features in the proprietary model developed by Sibanda & Zantwijk attorneys have been de-activated
Base turnover in currency of choice                           5,000,000                      MyPatent does not guarantee the accuracy of this model or that this model has not been tampered with
Projected growth                                          Year 1                 Year 2              Year 3                 Year 4                 Year 5                Year 6                Year 7                  Year 8            Year 9               Year 10
                                                                 30.00%               30.00%               25.00%                25.00%                 20.00%                 20.00%                15.00%                 15.00%            15.00%                15.00%
Average PBIT for period (as % of Turnover)                       20.00%                                                                                          For years 6 to 10 consider limiting growth to inflation + GDP growth
Notional royalty as a % of PBIT                                     25%
Apportionment of royalty to asset valued                            80%
Royalty rate                                                     4.00%        Override royalty?   0              5.00%                                                                            4.00%
Income tax rate                                                    29%
Discount rate                                                   25.00%                            1
Useful economic life (yrs)                                           8


                                           Dec-08                 Year1                  Year 2                  Year 3              Year 4               Year 5              Year 6              Year 7                Year 8               Year 9                Year 10
                                                                                              0
Turnover                                5,000,000             6,500,000               8,450,000              10,562,500          13,203,125           15,843,750          19,012,500          21,864,375           25,144,031           28,915,636              33,252,981

Royalty payable                           200,000               260,000                 338,000                422,500             528,125              633,750             760,500              874,575            1,005,761             1,156,625              1,330,119

Tax                                         58,000               75,400                   98,020               122,525             153,156              183,788             220,545              253,627              291,671              335,421                 385,735

Profits after tax (life)                  142,000               184,600                 239,980                299,975             374,969              449,963             539,955              620,948              714,090                     0                     0

NPV of royalty stream:                  1,147,458 Rands                   (Value)                     Click here to read our articles on common valuation mistakes


              35,000,000

              30,000,000

              25,000,000                                                                                                                                                                               0
                                                                                                                                                                                                       0
   Turnover




              20,000,000
                                                                                                                                                                                                       0
              15,000,000                                                                                                                                                                               0

              10,000,000

               5,000,000

                      0
                                 2008                2009                 2010                        2011                2012                2013                 2014                2015                2016                  2017                  2018
                                                                                                                                              Years

© MyPatent, Intangible Consulting (Pty) Ltd, 2007
Approximate values of hurdle rates

(corresponds to a Treasury Bond of 7%)
Risk                                                                                       Approximate hurdle rate
"Risk free" such as building a duplicate plant to make more of a currently made and sold
product in response to presently high demand                                               Approximates corporate rate of borrowing, 10-18%
"Very low risk", such as incremental improvements with a well-understood technology        15-20%; discernibly above the corporation's goals for return on
into making a product presently made and sold in response to existing demand               investment to its shareholders
"Low risk", such as making a product with new features using well-understood technology
into a presently served and understood customer segment with evidence of demand for
such features                                                                              20-30%
"Moderate risk", such as making a new product using well-understood technology to a
customer segment presently served by other products made by the corporation and with
evidence of demand for such a new product                                                  25-35%
"High risk", such as making a new product using a not well-understood technology and
marketing it to an existing segment or a well-understood technology to a new market
segment                                                                                    30-40%
"Very high risk", such as making a new product with new technology to a new segment        35-45%
"Extremely high risk", such as creating a startup company to go into the business of
making a product no presently sold or even known to exist using unproven technologies      50%-70% of even higher


© MyPatent, Intangible Consulting (Pty) Ltd, 2007
Ballpark royalty rates

Category                                     Surveys       Average Royalty
Accessories                                            1               8.90%
Aerospace                                              3               4.00%
Apparel                                                3               6.80%
Automotive                                             8               3.30%
Baby Goods                                             1               6.00%
Baked Goods                                            1               5.20%
Books - Softcover                                      1               7.50%
Books - Hardcover                                      1              10.00%
Building & Construction                                1               5.60%
Business Services                                      1              11.90%
Chemicals                                              7               4.30%
Child related                                          1               6.30%
Computers                                              6               4.60%
Consumer Goods                                         3               4.80%
Domestics                                              1               7.30%
Education Related                                      1               8.30%
Electronics                                            9               5.10%
Energy & Environment                                   4               8.00%
Entertainment                                          1              15.50%
Diagnostics                                            1               3.50%
Distribution                                           1               5.20%
Fast Food                                              1               5.10%
Food                                                   7               4.40%
Footwear                                               1              10.00%
Franchises                                             1               5.00%
Furniture / Home Furnishes                             1               7.00%
Government / University                                2               7.10%
Healthcare Products / Equipment                        7               6.40%
Hospitality / Leisure                                  2               4.50%
Housewares                                             1               7.00%
Industrial Products                                    1               6.40%
Internet                                               2               8.20%
General Manufacturing                                  2               6.40%
Machine/Tools                                          5               4.80%
Maintenance Services                                   1               6.90%
Media & Entertainment                                  2               6.50%
Music / Video                                          1               7.00%
Medical Equipment                                      1               4.00%
Novelties / Gifts                                      1               8.30%
Personnel Services                                     1              12.50%
Pharmaceuticals / Drugs                                6               7.50%
Pre-Clinical                                           1               3.00%
Phase I                                                1               7.50%
Phase II                                               1              11.50%
Phase II                                               1              15.00%
Launched                                               1              20.00%
Research Reagents (e.g. expression vector,
cell culture, media supplements)                       1              3.00%
Diagnostic Products (e.g. monoclonal
antibodies, DNA probes)                                1              3.00%
Therapeutic Products (e.g. monoclonal
antibodies, cloned factors)                            1              7.50%
Vaccines                                               1              7.50%
Animal Health Products                                 1              4.50%
Plant/Agriculture Products                                 1               4.00%
Printing                                                   1               5.40%
Publishing                                                 1              10.60%
Biotechnology                                              1               7.00%
Pharma & Biotech                                           3               5.00%
Real Estate                                                1               7.40%
Restaurants                                                1               4.60%
Retail                                                     1               6.10%
Semiconductors                                             4               3.70%
Services                                                   2               5.90%
Software                                                   6               9.60%
Sporting Goods                                             2               7.70%
Stationery / Paper                                         1              10.00%
Telecom / Communications                                   3               5.80%
Toys & Games                                               3               9.70%
Travel                                                     1               5.60%
Trademarks and Copyright                                   1              10.60%
Greeting Cards & Giftwrap                                  1               3.50%
Household Items (cups, sheets, towels)                     1               5.50%
Fabrics & Apparel                                          1               6.00%
Posters & Prints                                           1              10.00%
Toys & Dolls                                               1               5.50%

Compiled using our database of 42 royalty surveys.

Please note that royalties may be spread over a range from 0% to three times the "average royalty" and that the above average royalty
rates should only be used to support royalty rates determined using first principles. (see www.zaiplaw.co.za)

© MyPatent, Intangible Consulting (Pty) Ltd, 2007
Royalty rate factors

Main factors:
            1 Strength of IP arsenal
            2 Monopoly granted by IP
            3 Degree to which IP drives sales / profits

Other factors:
            1 the royalties received by the proprietor for the licensing of the IP in suit, proving or tending to prove an established royalty;
            2 the rates paid by the licensee for the use of other IP comparable to the IP in suit;
               the nature and scope of the licence, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the
            3 manufactured product may be sold;
               the licensor's established policy and marketing program to maintain his IP monopoly by not licensing others to use the IP or by granting licences under
            4 special conditions designed to preserve that monopoly;
               the commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business;
            5 or whether they are inventor and promoter;
               the effect of selling the protected specialty in promoting sales of other products of the licensee; the existing value of the IP to the licensor as a generator
            6 of sales of his non-protected items; and the extent of such derivative or convoyed sales;
            7 the duration of the IP and the term of the licence;
            8 the established profitability of the product made under the IP; its commercial success; and its current popularity;
            9 the utility and advantages of the IP over the old modes or devices, if any, that had been used for working out similar results;
               the nature of the protected IP; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who
           10 have used the IP;
           11 the extent to which the infringer has made use of the IP; and any evidence probative of the value of that use;
               the portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the IP
           12 or analogous IP;
               the portion of the realisable profit that should be credited to the IP as distinguished from non-protected elements, the manufacturing process, business
           13 risks, or significant features or improvements added by the infringer;
           14 the opinion testimony of qualified experts; and
               the amount that a licensor and a licensee would have agreed upon if both had been reasonably and voluntarily trying to reach an agreement; that is, the
               amount which a prudent licensee - who desired, as a business proposition, to obtain a licence to manufacture and sell a particular article embodying the
               protected IP - would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by
           15 a prudent proprietor who was willing to grant a licence.
Georgia-Pacific Corp v United States Plywood Corp

© MyPatent, Intangible Consulting (Pty) Ltd, 2007

				
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