The Market Approach values assets typically based on an analysis of arm’s-length sales or licenses of guideline intangible assets which are often referred to as Comparable Uncontrolled Transactions. Several generally accepted methodologies fall within the Market Approach related to assessing the value of the intellectual property including the following:

Comparable Profit Margin Method

The Comparable Profit Margin Method is based on the premise of relying on comparable company profit margins. This method is most applicable when the owner has one extraordinary intangible asset that stands out as the reason for the owner’s success and the owner’s excess profitability. This method is also applicable when there is a sufficient number of competitors that do not enjoy the benefit of the extraordinary intangible asset.

Sales Comparison Method

The Sales Comparison Method is based on the premise of relying on CUT sales of intangible assets compared to the subject asset and calculating transaction multiples to be applied to the subject asset. This method is most applicable when the asset is the type of intangible asset that sells in the marketplace as a separate intangible asset. In other words, such assets transact as naked intangible assets. This method is also applicable when there are sufficient arm’s-length sales of the subject intangible asset type.

Licensing Rate Comparison Method

The Licensing Rate Comparison Method is based on the premise of relying on CUT licenses of similar intangible assets. This method is applicable when the analysis objective is to determine an appropriate royalty rate. This method is appropriate when the subject bundle of rights is for a limited term and is a use (not a fee simple) right. This is because typical intangible asset license agreements encompass a defined (and limited) bundle of rights, in a specific territory, for a specific use, and a specific period.