Why it's important to value IP

The value of intellectual property (IP) can dramatically increase over the years. It's important to protect your assets early on and plan for business growth. 

Why should I value my IP assets?

Businesses often value their physical assets but forget about valuing their IP. It's important to recognise the value of these assets early and protect them for the future. The four types of IP, which are intangible assets, can be of significant value to your business.

Reasons to protect your idea with IP:

Provide exclusivity

Registering your intellectual property gives you the exclusive right to sell, promote or develop a product for a certain length of time.

Give you a competitive advantage

IP rights can provide many advantages, including:

  • making your asset more valuable to investors
  • allowing you to decide who can use your IP and how it can be used
  • being used many times and licensed to several licensees in different geographic regions
  • reducing the chance of your products and/or services being replicated.

Be profitable

You can sell your IP rights for financial gain.

Help society

IP rights encourage people to create better products and services that help people improve their lives.

How can I value my IP?

To protect your intellectual property, start by doing an IP audit. There are two main steps involved:

1. Identify your IP assets

You should value your IP assets as you would value physical assets, but first you need to know what they are.

To identify your assets, ask these questions:

  • What are my businesses’ key products or services?
  • What legal rights do I have for my products or services?
  • How do my legal rights improve my place in the market?

Having answers to these questions will help put a fair value on your IP.

2. Place a value on your IP

IP assets should be valued the same way as physical assets. Valuing your assets helps you:

  • determine the overall value of your business
  • provide a tool to measure and manage your assets
  • attract potential buyers and investors
  • provide security and backing for lenders
  • provide tax benefits (tax deductions)
  • reduce the proportion of your business’ net worth attributed to goodwill.

How do I measure my IP's value?

The value of intellectual property can be measured by:

  • cost basis
  • fair value basis.

The final valuation price will be decided when the IP gets sold or transferred.

Common IP valuation methods include:

  • relief from royalties
  • excess profits or notional royalties payable
  • capitalisation of earnings
  • net present value of incremental cash flows
  • gross profit differential
  • premium sales price
  • comparable market transactions
  • cost-based
  • brand strength
  • real options.

Need help?

It's important to recognise the value of your IP assets early and protect them for the future. We recommend engaging an IP professional, such as an accountant, to help you accurately value your IP.

Engage an IP professional

Related content

Trade marks Patents Design rights Plant breeders rights Copyright

Types of IP

There are four types of IP you can register through IP Australia.

Trade marks Design rights Patents Plant breeders rights Enforce

How to commercialise my IP

Intellectual property (IP) rights can help you successfully commercialise your idea once you've decided to take it to market.

Design rights Patents Plant breeders rights Trade marks Enforce

IP insurance

Defending your intellectual property (IP) rights against infringement can be costly. Protect yourself and your trade mark, patent, design right or plant breeder's right (PBR) by taking out an IP insurance policy.