ABSTRACT
With its origins in the intellectual property (IP) litigation of the
1980s and 1990s, the valuation of IP (primarily patents) in the
United States was initially limited to damages calculations in
legal cases involving claims such as patent infringement. With the
introduction of tax planning involving IP, such as transfer pricing
and patent donations, the valuation of intangibles became critical
in nonlitigation circumstances as well. Companies were required
to include in their tax reporting the fair market value (FMV) of IP
involved in transactions, such as the intercompany transfer of IP
or the donation of a patent to a university. New accounting rules
related to business combinations in the United States, introduced
in the early 2000s, expanded the need for IP valuations even more,
as companies were now required to report the fair value (FV) of
intangibles that were purchased with a target in a mergers and
acquisitions (M&A) deal. These compliance situations-litigation, accounting, and tax reporting-carry with them a high degree of
scrutiny by the court or regulating authorities and require a third-
party, IP valuation expert’s opinion in the form of a report or
testimony.