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.