Trademark Valuation: The Asset Missing from the Balance Sheet

An internally developed brand is largely invisible on the balance sheet, yet it is the most contested line in a sale price, the basis of a royalty rate, and an asset that can be contributed as capital. At those moments a number is required.

Three approaches

• Cost: what it would take to recreate the brand today — simple, but spend does not equal strength.
• Market: comparable transactions, which are hard to find because brand deals are rarely disclosed.
• Income: the present value of future cash flows attributable to the brand, most often via a relief-from-royalty calculation.

Legal robustness moves the number

Of two brands with identical commercial performance, the legally sound one is worth materially more, because a buyer or licensee is paying for something enforceable.

• Is it registered, and do the classes cover what is actually sold?
• Is there protection in the export markets generating the revenue?
• Are any classes exposed to non-use cancellation?
• Are there pending oppositions or invalidity actions?
• Is the portfolio consolidated in one entity, together with domains and social accounts?

When valuation is needed

• Pricing an assignment or an acquisition.
• Justifying a royalty rate in a licence.
• Contributing the mark as capital.
• Calculating lost profit in infringement proceedings.
• Setting franchise entry fees, or pricing a shareholder exit.

See our articles on IP due diligence and damages, or contact us.

General information only; not legal, tax or valuation advice.