Method for deriving optimal income stream in intellectual asset transactions

• US 20030139988A1
• Filed: 01/23/2002
• Published: 07/24/2003
• Est. Priority Date: 01/23/2002
• Status: Abandoned Application

• Current Assignee: Gavin Clarkson
• Original Assignee: Gavin Clarkson
• Inventors: Clarkson, Gavin
• Application Number:
  US10/055,289
• Publication Number:
  US 20030139988A1
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03

Abstract

The optimum royalty value of an intellectual asset is calculated using empirical data to determine an expected return on intellectual assets based on company history and industry averages (or medians). The value is calculated by determining the contribution to profit of intangible assets, deleting the contribution of assets other than intellectual assets from this contribution and deriving a base royalty rate from the difference. The contribution to profit of intangible assets may be based on publicly available information or on private company information. The method includes determining the weighted average of cost of capital in order to allocate the profits associated with intellectual assets.

Claims

1. A method for calculating the optimum value of an intellectual asset comprising the steps of:

a. determining the contribution to profit of intangible assets;

b. deleting the contribution of assets other than intellectual assets from this contribution;

c. deriving a base royalty rate from the difference.

2. The method of claim 1, wherein the contribution to profit of intangible assets is based on publicly available information or private company information.

3. The method of claim 1, wherein the contribution to profit of intangible assets is based on an industry average (or median).

4. The method of claim 1, wherein the contribution to profit of intangible assets is calculated by first calculating the weighted average of cost of capital.

5. The method of claim 4, wherein the weighted average of cost of capital (WACC) is derived, using the following formula:

WACC=E(Ri)+D(Ri)=Rf+β

×

E(Rp)+i×

(1−

t)

where

E(Ri)=expected rate of return for equity investors

D(Ri)=expected rate of return for debt investors

Rf=risk free rate of return

β

=beta or systematic risk

E(Rp)=expected risk premium

i=interest rate on debt

t=effective federal and state tax rate.

6. The method of claim 4, wherein the weighted average of cost of capital (WACC) is inserted into the following formula:

7. The method of claim 6, wherein the weighted return on intangible assets is Riw, and is calculated as:

8. The method of claim 6, wherein the unweighted return on intangible assets is R_i, and is calculated as:

9. The method of claim 7, the contribution to profits of intangible assets (CPIA) is calculated based on debt free net income, which is expressed as:

DFNI;

DFNI=NI+InterestExpense(1−

tax),

and wherein the CPIA is express as a percentage, as follows;

10. The method of claim 1, wherein the contribution to profit of intellectual assets (CPIPIA) is calculated by subtracting the industry average (or median) distributor CPIA from the CPIA value for a given firm.

11. The method of claim 1, wherein the contribution to profit of intellectual assets (CPIPIA) is calculated by subtracting the industry average (or median) distributor CPIA from the average (or median) manufacturer CPIA value for a given industry.