An Overview of Patent Quality: Assessment Valuation and Financial Reporting Implications

16 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Mary Margaret Frank

University of Virginia - Darden School of Business

David Martin

affiliation not provided to SSRN

Paul J. Simko

University of Virginia - Darden School of Business

Abstract

A significant fraction of corporate market values derive from intellectual property. It is vital for the practicing manager to appreciate the risks and uncertainties surrounding intellectual property. This note focuses specifically on patent positions, arguing that these deserve special scrutiny because of an emerging crisis within and among governments, corporations, and inventors. The objective of this note is to introduce the reader to patent practices and policies as they may affect the intellectual-property positions of firms. In particular, the note covers five aspects of importance to the practicing manager.

Excerpt

UVA-F-1539

AN OVERVIEW OF PATENT QUALITY:

ASSESSMENT, VALUATION, AND FINANCIAL REPORTING IMPLICATIONS

A significant fraction of corporate market values derive from intellectual property. For firms in such fields as software (Microsoft), entertainment (Walt Disney), biotechnology (Celera Genomics), computing equipment (Rambus), defense and aerospace (Lockheed Martin) and consumer foods (Coca-Cola), the monopoly rights to patented inventions, copyrights, and trademarks can account for a sizable portion of the value of the firm. The value of intellectual property figures importantly in a range of business and financial decisions, such as those regarding mergers and acquisitions, initial public offerings of equity, loans, bankruptcy workouts, privatizations, and project financings. For these reasons, it is vital for the practicing manager to appreciate the risks and uncertainties surrounding intellectual property. This note focuses specifically on patent positions, arguing that these deserve special scrutiny because of an emerging crisis within and among governments, corporations, and inventors.

The objective of this note is to introduce the reader to patent practices and policies as they may affect the intellectual-property positions of firms. In particular, the note covers five aspects of importance to the practicing manager:

1. Basic introduction to patents: the rights they permit, the motives for holding, and the risks they entail.

. . .

Keywords: intellectual property, corporate market values, patent practices and policies

Suggested Citation

Bruner, Robert F. and Frank, Mary Margaret and Martin, David and Simko, Paul J., An Overview of Patent Quality: Assessment Valuation and Financial Reporting Implications. Darden Case No. UVA-F-1539, Available at SSRN: https://ssrn.com/abstract=1279965 or http://dx.doi.org/10.2139/ssrn.1279965

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://faculty.darden.edu/brunerb/

Mary Margaret Frank

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4432 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/frank.htm

David Martin

affiliation not provided to SSRN

Paul J. Simko

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-1391 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/simko.htm

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