Thursday, April 26, 2012



By  K P C Rao., 

       1.      BACK GROUND

The term ‘Intellectual Property’ (IP) reflects the idea that its subject matter is the product of the mind or the intellect. Intellectual property rights help in providing exclusive rights to creator or inventor thereby induces them to distribute and share information and data instead of keeping it confidential. It provides legal protection and offers them incentive of their work. Rights granted under the intellectual property act helps in socio and economic development.

India has defined the establishment of statutory, administrative and judicial framework for protecting the intellectual property rights in the Indian territory, whether they connotes with the copyright, patent, trademark, industrial designs or with other parts.

Tuning with the changing industrial world, the intellectual property rights have continued to strengthen its position in the India. In 1999, the government has passed the important legislation in relation to the protection of intellectual property rights on the terms of the worldwide practices and in accordance to the India's obligations under the Trade Related Aspects of Intellectual Property Rights (TRIPS) including
The Patents (Amendment) Act, 1999 amending the Patents Act of 1970, The Trade Marks Act, 1999 replacing the Trade and Merchandise Marks Act, 1958, The Copyright (Amendment) Act, 2000, The Geographical Indications of Goods (Registration & Protection) Act, 1999, The Industrial Designs Act, 2000 replacing the Designs Act, 1911, The Patents (Second Amendment) Act, 1999 further amending the Patents Act 1970 and making it compliance with the TRIPS.

Indian economy has been consistently growing to rank as world’s largest economy. Speculators of developments see various exotic situations like joint ventures, mergers & acquisitions, technology transfers, foreign direct investments. For all these, valuations are quite important, especially for Intellectual Property Rights, where a lot of possibilities exist.

Now the CMAs have to understand the economics of IP development & life cycles and its related technical aspects including IP portfolio Management Matrix to do justice to economic –financial accounting valuations.

Importance of Intellectual Property Rights

The first reason is that it is both just and appropriate that the person putting in the work and effort into an intellectual creation has some benefit as a result of his endeavor. The second reason is that by giving protection to intellectual property many such endeavors are encouraged and industries based on such work can grow, as people see that such work brings financial return.

An example of this later point is given by the case of the world pharmaceutical industry. An investment of many years, and R&D expenses (lab time for creation, testing, government or agency approval procedures) running into the hundreds of millions of pounds sterling (or yen, lira, dollars) may be necessary before any new medicine reaches the market. Without the IP rights to exclude competitors from also making such a new medicine, the pharmaceutical company creating such a new compound would have no incentive to spend the time and efforts outlined to develop their drugs.

Without patent protection, such a company would face economic losses originating from the “free-riding” of their competitors. Without trademark protection, this company, again, could not build “brand” that, hopefully, would last beyond the years of protection granted by patents.

Without the protection given within IP laws and treaties, such pharmaceutical firms simply would not commit an effort to experiment, in searching for new health products. As you can see from this brief example, without the protections outlined above, the world might well be literally less healthy than it is.

Intellectual property rights may also help to extend protection to such things as the unwritten and unrecorded cultural expression of many developing countries, generally known as folklore. With such protection they may be exploited to the benefit of the country and cultures of origin.

Developments in the Intellectual property in India

1)      Establishment of NIIPM

The Government has already approved the proposal for establishment of a National Institute for Intellectual Property Management (NIIPM) at Nagpur. The Institute will perform training, education and research in this field.

2)     Modernization of the IP Offices

To provide additional employees, establish a higher level of computer network to support on-line processing, strengthen the data base and novelty search facilities, to make the people aware of generation activities, and to provide an access to international treaties/conventions easily the government is planning to modernize the IP offices. This proposal will be taken up in the 11th five year plan.

3)     Madrid Protocol on Trademarks

Madrid Protocol, administered by World Intellectual Property Organization (WIPO), is an uncomplicated, facilitative and lucrative system for the registration of International Trademarks. If India becomes a member of this then the Indian companies will have an advantage of registering their trademarks in all the countries which are the members of this protocol by filing a single application. The amendment of the Trade Marks Act is in progress so that our country can be a member of this protocol.

4)     International Searching Authority (ISA) and International Preliminary Examining Authority (IPEA)

ISA and IPEA’s provide search reports on uniqueness and examination reports on patentability of various inventions. In India a scheme is under consideration to get recognition for the Indian Patent Office as an International Searching Authority (ISA) and International Preliminary Examining Authority (IPEA) under the Patent Co-operation Treaty.

5)     Mashelkar Committee

The Indian government has established a group of technical experts to examine the following patent law issues:

       i)            Whether it would be compatible to the TRIPS agreement to limit the grant of patent for pharmaceutical substances only to a new chemical entity or to a new medical entity.
    ii)            Whether it would be compatible to the TRIPS agreement to exclude micro-organisms from patenting.

Significance of IP Valuation

Value is the representation of all future benefits of ownership, compressed into a single payment. Therefore, value is continually changing as the future benefits increase or decrease, either with the passage of time or with changing perceptions of what the future will bring. Value does not exist in the abstract and must be addressed within the context of time, place, potential owners and potential uses.

With the increasing global competition in Post WTO regime, companies are focusing their efforts on creating shareholder value in order to survive the intense competition. In view of this, it is becoming important for companies to measure the value they create for their shareholders in light of competitive situations.

In knowledge-based economies, intellectual assets such as intellectual property (IP), human capital and organisational capabilities play a crucial role in business performance and economic growth. An increasing share of the market value of firms appears to derive from their intellectual assets, and firms are managing these assets more actively to further enhance their contribution to value creation. These developments raise the importance of technology licensing markets and IP valuation schemes.

Intellectual Properties increasingly play a lead role in promotion of innovation and economic growth in a knowledge-based economy. Effective management and utilization of intellectual assets is essential to business performance and competitiveness, foreign direct investments decisions, Business combination decisions etc. Therefore there is a need to improve knowledge and information about the valuation and utilisation of Intellectual Property (IP).

IP Valuation in Emerging Markets

The problems of Valuation in Emerging Markets are:

             i)      Risk and obstacles in Business,
          ii)      Great micro economic uncertainty,
        iii)      Control on capital flow,
         iv)      Illiquid Capital Markets,
           v)      Less rigorous Accountings or Financial Reporting Systems and
         vi)      High level of Political Risk, etc.

The Valuers generally take extra caution for valuing assets of / or corporate valuation of companies in emerging markets. McKinsey suggested (Koller, Whessels) the Mixed approach. They Add Country Risk Premium, Adjustment for Inflations & use of Comparable trade & transaction multiples. As most of valuers estimate on the basis of historical assumptions that in real term, GDP declines once in every five years for emerging market (on average), they take about 20 % addition in risk adjusted Cost of capital rate (for emerging market risk rate).

One myth is that IPs are not relevant to countries in development, because of the relatively low state of technological development. Some critics of the patent system claim that IP may even be harmful to developing nations because of the power over markets and price that IP confer on their owners that take them out of competition.

Indeed, IP are power tools for economic development for Emerging Countries. The role of governments and policymakers of emerging countries is crucial in determining whether such countries use the power of the IP system for economic development by implementing pro-active IP policies.


1)     IP ASSETS

An asset is a claim to future revenue streams, such as the rents generated by commercial property, interest payments derived from a bond, or cash flows from a production facility. An IP asset is a claim to future accruals that does not have a physical or financial (a stock or a bond) measurement. A patent, a brand, or a unique organizational structure (e.g., an Internet-based supply chain) that generates revenue stream, value or cost savings, are IP assets. IP assets possess the following attributes:

a)     Non physical in nature
b)     Capable of producing future economic benefits
c)     Protected legally or through a de facto right
d)     For Valuation purpose, the asset must also be readily identifiable and capable of being separated from other assets.

Therefore, the terms IP, knowledge assets, and intellectual capital are used interchangeably. All three are widely used—IP in the accounting literature, knowledge assets by economists, and intellectual capital in the management and legal literature—but they refer essentially to the same thing: a nonphysical claim to future benefits. When the claim is legally protected, such as in the case of patents, trademarks, or copyrights, the asset is generally referred to as intellectual property.

Physical and financial assets are rapidly becoming commodities, yielding an average return on investment, as in this era of global village, physical assets are available and its existence is transparent. Wealth and growth in today’s economy are primarily driven by IP assets in form of intellectual properties. Value creation, abnormal profits and dominant competitive positions achieved by IP. There are three major nexuses of IP, distinguished by their relation to the generator of the assets: innovation, ‘organizational’ designs and “Brands and human resources”. “Brands”, a major form of IP prevalent particularly in consumer products beverages like Coke. Coke’s highly valuable brand is the result of a secret formula and exceptional marketing savvy. In Internet companies like Infosys, IP assets are often created by a combination of innovation. The unique products created and acquired by Infosys during the 1990s are responsible for its IP .The human resources are generally created by unique personnel and compensation policies, such as Talent pools, citation index of the organization, investment in training, incentive-based compensation, and collaborations with universities and research centers. Such human resource practices enable employers to reduce employee turnover, provide positive incentives to the workforce, and facilitate the recruitment of highly qualified employees. Specific organizational designs like Xerox’s Eureka system, which is aimed at sharing information among the company’s 20,000 maintenance personnel, enhance the value of the human resource-related IP by increasing employee productivity. While it is convenient to classify IP by their major generator— innovation, organizational design, Brands or human resource practices. The IP assets are often created by a combination of these sources.

Forces Driving IPs

IP (intellectual capital or knowledge assets) are surely not a new phenomenon. With the creation of civilization whenever ideas were put to use in households, fields, and workshops, IP were created. Breakthrough inventions, such as Internet, mobiles, electricity, engines, the telephone, and pharmaceutical products, have created waves of IP. New driving surge in IP since 1980 is the unique combination of two related economic forces:

a)     Intensified business competition, brought about by the globalization of trade and deregulation in key economic sectors like telecommunication etc
b)     The arrival of Information Technologies (IT) and Internet.

The emergence of IP as the major driver of corporate value at Ford is thus the direct result of the two forces mentioned above: competition-induced corporate restructuring facilitated by emerging information technology. Production-centered economies were sooner or later exhausted and could no longer be counted on to provide a sustained competitive advantage in the new environment: “…traditional economies of scale based on manufacturing have generally been exhausted at scales well below total market dominance, at least in the large U.S. market. In other words, positive feedback based on supply-side economies of scale ran into natural limits, at which point negative feedback took over. These limits often arose out of the difficulties of managing enormous organizations.”

Once economies of scale in production have been essentially exhausted, production activities, intensive in physical assets, became commoditized and failed to provide a sustained competitive advantage and growth. Companies responded to this commoditization of manufacturing by:

a)     Outsourcing activities (e.g., Ford’s parts production) that do not confer significant competitive advantages, and
b)     Innovation as the major source of sustained competitive advantage. Thus providing gateways for creating IP.

Concerns of IP

This analysis clarifies the relevance of intellectual Properties to wide range of business and society, with the following groups having primary interest in IP:

a)     Promoters and shareholders: IP investments are associated with excessive cost of capital. Excessive cost of capital hinders investment and growth. Promoters and shareholders are interested in mechanisms aimed at reducing the excess cost of capital.
b)     Capital market regulators: Research documents the existence differences in information about organizations between corporate insiders and outsiders in IP intensive companies. That may lead to consequences such as systematic losses to the less informed persons and thin volume of trade, which the regulators want to check.
c)     Accounting standard boards: The deficient accounting for IP leads to presentation of biased and less trustworthy and even fraudulent financial reports. This should obviously be of concern to regulators of financial information.
d)     Policymakers. — In key areas, such as the assessment of fiscal policy (e.g., R&D tax incentives) supporting innovation, optimal protection of IP. A thorough examination of the attributes of IP and specific harmful consequences related to intellectual Properties should be concerned about.

WIPO holds that IP should be of benefit to all people and, in this sense, views IP protection as leading to IP opportunities. The basic ingredients that drive the knowledge economy and feed the IP system – creativity and innovation – are found all over the world. Lack of awareness of the enabling possibilities of IP systems paired with the unfortunate view that IP is merely a field of law have led many countries away from taking full advantage of IP regimes. What this view neglects is an actively managed IP. An IP system established with the needs of the country in mind and managed in the best interests of the country can substantially contribute to economic growth and the welfare of human beings all over the world.

To bridge the gap that currently exists in the use of the IP system, WIPO is actively seeking to bring knowledge about the appropriate valuation and use of IP to countries. In doing so WIPO builds on three decades of technical assistance through which it has sought to enable potential IP owners to become high performers. Jointly with IP stakeholders, WIPO has created toolkits that help countries and people to understand best practice IP management, has illustrated the real ‘value added’ of IP systems through concrete field studies and has promoted knowledge sharing among Member States by sharing IP success stories.


Significance of Value Reporting of IP

IP assets surpass physical assets in most business enterprises, both in value and contribution to growth; remain absent from corporate balance sheets. This treatment of capitalizing physical and financial investments, while expensing IP, leads to biased and deficient reporting of organisations’ performance and value.

The market-to-book (M/B) value i.e. the ratio of the capital market value of companies to their net asset value, as stated on their balance sheets is frequently invoked to motivate the focus on IP. The mean M/B ratio of the S&P 500 companies has continuously increased since the early 1980s. This suggests that, of every $6 of market value, only $1 appears on the balance sheet, while the remaining $5 represents IP assets. Hence, some argue, the current focus on IP is warranted.

There are many Factors highlighted for Valuation of IP Assets like The subjectivity of the valuation process, the separability of IP assets from underlying business and the consistency of valuation method applied.

Studies conducted on IP assets found

a)     Many IP assets are identifiable, separable and capable of being valued
b)     There was considerable consensus over valuation methodologies
c)     Valuation of IP may be subjective but not more than valuation of unquoted companies, pension funds and emerging markets.

IP Valuation Approaches

                i)   Cost Based Approach

This approach may be used to assess the replacement cost of the IP or the cost of creating equivalent assets. This approach requires accumulation of costs invested in the IP. In this approach, costs are adjusted for Inflation and Required rate of return on investment.

However, there are certain limitations associated with of Cost Based approach:

a)     No correlation between expenditure and subsequent value.
b)     Lack of Information
c)     On separation of expenditure that enhance value and those distorts

             ii)   Market Based Approach

In Market based approach, the IP are valued by reference to recent market transactions for comparable assets, which provides credibility and objectivity. In this approach term of most IP transactions are not disclosed. Values may have to be estimated from the sale of companies owning substantial IP assets.

              iii)      Economic Based Approach

The Economic based approach is Identification, separation and quantification of cash flows attributable to IP and Capitalization of those Cash flows attributable to the IP assets. Various methodologies exist. Despite apparent differences, all methodologies seek to quantify parameters.

                  iv)   Royalty Method

Under Royalty Method IP assets are valued by capitalizing estimates of annual post tax royalty payable under a licensing arrangement. Valuation parameters may be estimated using details of Arm’s length arrangements for comparable intangible assets. Reasonable royalty approach is often used in the estimation of damages arising from patent infringement. There are many different sources of royalty data.

Bankruptcy - Relevance of IP 

When Enron descended into Chapter 11[1] on December 12, the $63 billion bankruptcy represented the largest-ever filing in modern history; the attorneys were to consider how to handle a bankruptcy when the debtor company’s possessions are largely composed of intellectual property. Perhaps the intangible assets are not much use to the business that developed it, but another organization may find them to be very valuable. It appears that Investors are often betting on cash flows they anticipate in the future. Therefore, a correct assessment of risk must be performed for the company being valued.

The declaration of bankruptcy may itself diminish the value of intellectual property and other intangibles. There is a possibility that some potential buyers will question the value of the intangible assets, considering that the company wasn’t able to succeed, after studying the brand value of a well-known consumer electronics company that declared Chapter 11 and found that its name still carried considerable value. But consider a company like Enron: That name currently has negative connotations and the market value of its intellectual property may now be significantly weakened. If the business is being reorganized and will continue to operate, the company will look at the assets’ value as a continuing business, based on current value and whether there is an impairment of value.

Under FASB Statement No. 141, a recently issued regulation, intangible assets like patents, trademarks, intellectual property and copyrights must generally be valued when they are acquired as part of a business combination. But if a company develops intellectual property internally, it would generally be expensed as R&D. Although there are no prescribed rules for valuation of IP at bankruptcy, the practice of bankruptcy laws recognize valuation of intangible assets.


In the mid-1980s, Reckitt & Colman, a UK-based company, put a value on its balance sheet for the Airwick brand that it had bought. In 1988, Rank Hovis McDougall  (RHM), a leading UK food conglomerate, played heavily on the power of its IPs to successfully defend a hostile takeover bid by Goodman Fielder Wattie (GFW).

RHM’s defence strategy involved carrying out an exercise that demonstrated the value of HM’s IP portfolio. This was the first independent IP valuation establishing that it was possible to value IPs not only when they had been acquired, but also when they had been created by the company itself. After successfully defending the GFW bid, RHM included in its 1988 financial accounts the value of both the internally generated and acquired IPs under intangible assets on the balance sheet.

In 1989, the London Stock Exchange endorsed the concept of IP valuation as used by RHM by allowing the inclusion of intangible assets in the class tests for shareholder approvals during takeovers. This proved to be the drive for a wave of major Companies having good IP to recognize the value of IPs as intangible assets on their balance sheets. In the UK, these included Cadbury Schweppes, Grand Metropolitan (when it acquired Pillsbury for $5 billion), Guinness, Ladbrokes (when it acquired Hilton) and United Biscuits (including the Smith’s IP). Today, many companies including LVMH, L’Oréal, Gucci, Prada and PPR have recognized acquired IPs on their balance sheet. Some companies have used the balance-sheet recognition of their IPs as an investor-relations tool by providing historic IP values and using IP value as a financial performance indicator.

UK, Australia and New Zealand have been leading in term of Accounting Standards, the way by allowing acquired IPs to appear on the balance sheet and providing detailed guidelines on how to deal with acquired goodwill. In 1999, the UK Accounting Standards Board introduced FRS 10 and 11 on the treatment of acquired goodwill on the balance sheet. The International Accounting Standards Board followed suit with IAS 38. And in 2002, the US Accounting Standards Board introduced FASB 141 and 142, scarping pooling accounting and laying out detailed rules about recognizing acquired goodwill on the balance sheet. There are indications that most accounting standards including international and UK standards will eventually align to the US GAAP. This is because most international companies that wish to raise funds in the US capital markets or have operations in the United States will be required to adhere to US Generally Accepted Accounting Principles (GAAP).

Internationally recognized bodies like the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) determined for the harmonization of accounting standards at the global level. They have recognized the existing gap between the kind of information provided by accounting and the information needed by investors and stakeholders. The concerns raised by the FASB have led to a revision of the way in which IP is treated in Mergers and Acquisition (M&A). The new approach to IP in M&As is generally considered to be a very progressive step as it allows, for the first time in the history of accounting, to separately list the respective IP of the firms involved in the M&A and to put a value on such IP. The principal stipulations of all these accounting standards are that acquired goodwill needs to be capitalized on the balance sheet and amortized according to its useful life.

Recommended valuation methods are discounted cash flow (DCF) and market value approaches. The valuations need to be performed on the business unit (or subsidiary) that generates the revenues and profit. The accounting treatment of goodwill upon acquisition is an important step in improving the financial reporting of intangibles such as IPs. It is still insufficient as only acquired goodwill is recognized and the detail of the reporting is reduced to a minor footnote in the accounts.

There is also still a problem with the quality of IP valuations for balance-sheet recognition. Although some companies use an IP-specific valuation approach, others use less sophisticated valuation techniques that often produce questionable values.

The debate about bringing financial reporting more in line with the reality of long term corporate value is likely to continue, but if there is greater consistency in IP valuation approaches and greater reporting of IP values corporate asset values will become much more transparent.


Audit is a review process to validate the organisational methods and critically analyse the pros and cons of systems deployed or to be deployed. This is a tool to take stock of available assets so as to establish a system to protect the same .An IP audit is a systematic review of the IP owned, used or acquired by a company. The goal of an audit is to identify all the IP a company may have. It is all part of good business management and protection of your core business assets – often IP.

While some organisations have sophisticated processes and systems in place to identify, protect, and manage IP assets as they are created, majority may not. Some organisations have control for managing those IP rights that can be patented but find themselves in trouble when valuable staff members leave, taking undocumented know-how with them. "IP aware" organisations should periodically review.

While the use of IP audit is critical when the balance sheet fails to tell the complete story, this is only one of many times the IP audit should be used. In addition to valuation, IP audits are designed to identify those opportunities to exploit assets being under-utilized, to identify those areas where funds are being spent unnecessarily, and to correct those situations where legal or financial liability may be developing as a result of misuse of the IP owned by third parties.

Core Objectives of IP Audit

a)     Whether or not your IP rights are registered?
b)     Who owns the rights? If you do not, then identify any conditions that apply to their use
c)     An assessment of whether your IP is being used effectively
d)     Whether your rights are being challenged or threatened by others? When to conduct an IP audit? IP audits are generally conducted as part of an ongoing IP asset management program, when a business is being bought or sold or when you are enforcing or defending your IP rights. An IP audit will give you a broad picture of your IP assets.

The Kinds of IPs Covered Under Audit

The audit falls into two broad classes:

1)     IP created by the company itself.
2)     Used by the company under a license from another party.

The Second class is comprised of software licenses necessary for operation of PCs, servers, networks, Web sites, Web hosting, offsite storage, disaster recovery, equipment licenses, etc.

IP - Audits Tools

1)     Preparing IP Policies & Plans

The audit team can read policies, but if the policies are not followed, they provide little protection. A discussion of trade secrets will reveal far less than a quiz about what information the company most wants to keep from the competition.

2)     Personnel surveys and direct observation

If a software license provides for 100 computers, then the count should be checked. If staff reductions mean that only 15 machines operate the software, then the license should be renegotiated rather than merely renewed. The information gathering process is the heart of the IP audit.

3)     Internal Control systems & analysis

Identified contracts should be cataloged, patents listed, trade secrets categorized, and copyrighted materials indexed Assessing Risk & Preparing Response plan. By Good ideas Policies need to be revised to better protect the trade secrets. Within the "to do" list generated by the audit, priorities must be set. The "to do" list will serve as a starting point for the next audit.

The Key Steps to an IP Audit

1)     Meetings with representatives:

a)     To decide on the areas of concern for them,
b)     The type of research to be carried out,
c)     The personnel to be interviewed, and
d)     Other factors affecting the audit.

2)     Identification:

a)     Identifying, describing and defining the existing IP,
b)     Potentially patentable inventions,
c)     Potential or actual trademarks, copyright works and the like,
d)     Identifying staff know-how or trade secrets.

3)     Scheduling:

a)     For most companies, no audit has ever been conducted, now is the time to start.
b)     For those with some history of IP audits, new updates are necessary whenever any of the following events occur.
c)     Mergers, acquisitions, and sales of significant corporate assets should trigger new audits.
d)     Planning tool in advance of any filings for bankruptcy, significant plans for employee layoffs, business closure, or abolition of significant lines of business.

4)     Ownership:

Consideration of issues surrounding the ownership of the identified IP is the next step. It is essential to establish who or what entity owns the IP.

5)     Legal Protection:

The next step involves developing and recording strategies on how to best protect any unregistered IP and what sort of IP applications should be pursued to maintain a competitive advantage for the business. Such an analysis will usually extend to provide guidance on protecting in-house know how and to protect trade secrets.

6)     Liability Assessment:

This part of the audit will usually involve consideration of any liabilities or risks associated with the IP identified, including the likes of:

a)     Are there ownership risks and liabilities?
b)     What are the documentation/record keeping standards like?
c)     What risks are involved with trade secrets/know how?
d)     Key personnel liabilities
e)     Potential or existing litigation/opposition issues.
f)       Are there any obligations or encumbrances on the IP?

7)     Valuation of IP

The valuation step may also allow for some rationalization of the portfolio, especially if there are several pieces of IP being maintained that are not aligned with the current and/or future commercial direction of the business.

8)     Recording

After the IP audit has been conducted the findings of the audit should be recorded and perhaps even provided in an electronic format.

9)     Others

a)     List unregistered IP and give it a dollar value
b)     List other valuable assets such as client lists and corporate knowledge
c)     Check who has written and designed your marketing material (e.g. brochures, leaflets). Were they done in-house or were external contractors used? If an external contractor was used, did contracts specify who owned the IP that was created?
d)     Identify key staff involved in developing, maintaining and protecting your IP and investigate the feasibility of them signing agreements relating to confidentiality and competition
e)     Educate staff on the nature of IP, how to protect it and their responsibilities?  Who can help?

10)Setting Up Systems

If systems are already in place, changes may be recommended depending on the findings of the audit keeping in view the use of a 'watching service' to ensure a business is up to date with their competitors' IP protection strategies.

If no system is present develop a new system keeping in view the following aspects:

a)     R& D based business may wish to concentrate on establishing a system to identify and protect assets by obtaining IP registrations for the relevant technologies and documenting or recording non-registrable assets.
b)     A business may also wish to increase its competitors' time to market in order to obtain an edge in the market place usually achieved by monitoring the marketplace for infringement and by reviewing and selectively objecting to the IP registrations of competitors.
c)     A start-up company will usually want to gain the appropriate IP protection for its core technologies and/or other IP assets by Setting up systems for identifying IP at an early stage in the life of a company can also increase ingenuity based growth.
d)     A business acquiring or investing in another business will want to focus on valuing the assets of that business, including assessing the extent of IP rights. This is also an important consideration for organisations that are considering selling key IP assets.

An IP audit can have a big impact on the future potential of a business. As Intellectual Property assets become more important to organisations, those with a full appreciation of the value of these assets and strategies in place to deal with their protection will be in an excellent position to get the most out of their innovations.

5.      ROLE OF CMAs

The Rapid Economic changes taking place in the recent past served to enhance the recognition given by market participants to the importance of professional property valuations. The quickening pace in the globalization of investment markets further underscored the need for internationally accepted standards for reporting in value of property. It became obvious that without international valuation standards there was considerable potential for confusion. Differences of viewpoints among national professional valuation bodies might lead to unintentional misunderstandings. Therefore, the CMAs have to understand the economics of IP development & life cycles and its related technical aspects including IP portfolio Management Matrix to do justice to economic –financial accounting valuations.  In response to this situation, there is a need for joint efforts by the CMAs, scientific community, and practitioners of IP valuation and associations of investors with an interest in more adequate reflection of the value of companies in reports. Therefore, In order to overcome the contradictions between valuation standards the CMAs have to play a lead role with the following twofold objectives:

1)     To formulate and publish, in the public interest, valuation Standards for property valuation and to promote their worldwide acceptance; and
2)     To harmonise Standards among the world’s States and to identify and make disclosure of differences in statements and/or applications of Standards as they occur.

(Published in Management Accountant, Monthly Journal  of Institute of Cost Accountants of India, during Febraury, 2012)

[1] Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities.

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