Methodology

No black boxes. Every method, explained.

Valuation is judgement applied to evidence. Here is exactly how we do it — the methods we use, when we use them, the formulas behind them, and their limitations.

Cost approach

What would it cost to create this IP — or something that does the same job — today?

Historical cost (trended)

We add up what was actually spent on research, development, filing, prosecution and maintenance, then restate each year's spend in today's money using an inflation index.

Trended cost = Σ Costₜ × (CPI_valuation date ÷ CPIₜ)

When we use it: Early-stage IP with no revenue yet; as a floor value or cross-check.
Key inputs: R&D and personnel costs by year; Filing and attorney fees; Inflation index
Watch-outs: Spending money does not create value by itself — historical cost can overstate failed research or understate a lucky breakthrough.

Reproduction cost

The cost to build an exact replica of the IP today, using today's prices, methods and people.

Reproduction cost = Labour hours × current rates + materials + overheads + developer's profit + opportunity cost

When we use it: Software, technical drawings, databases where an exact copy is meaningful.
Key inputs: Effort estimates; Current labour rates; Time to recreate
Watch-outs: An exact replica may include outdated features nobody would rebuild today.

Replacement cost less obsolescence

The cost to create something that does the same job (not an identical copy), reduced for any functional, technological or economic obsolescence.

Value = Replacement cost × (1 − functional) × (1 − technological) × (1 − economic obsolescence)

When we use it: Software, know-how, assembled workforce-style assets, and as a cross-check in PPA.
Key inputs: Modern-equivalent build cost; Obsolescence evidence (age, market changes)
Watch-outs: Ignores the earning power of the IP; rarely the primary method for revenue-generating patents or brands.

Market approach

What have buyers and licensees actually paid for similar IP?

Comparable transactions

We find sales, assignments or licences of similar IP and adjust their prices for the differences that matter.

Indicated value = Comparable price × Π (1 + adjustmentᵢ)

Adjustments for scope, remaining life, territory, exclusivity and stage of development.

When we use it: Domain names, trademarks, patents in active licensing markets, catalogue sales.
Key inputs: Comparable transaction database; Deal terms; Asset characteristics
Watch-outs: True comparables are scarce and deal terms are often confidential; adjustments must be evidenced, not guessed.

Comparable royalty rates

We benchmark the royalty rate an independent licensee would pay, using licence databases filtered by industry and technology.

When we use it: Selecting royalty rates for relief-from-royalty and licensing negotiations.
Key inputs: Royalty-rate database by industry/technology; Licence terms
Watch-outs: Headline rates hide differences in royalty base, exclusivity and upfront payments.

Income approach

What future cash flows will this IP generate, and what are they worth today?

Discounted cash flow (DCF)

We forecast the cash flows attributable to the IP over its useful life and discount them back to today at a rate that reflects risk.

Value = Σₜ₌₁ⁿ CFₜ ÷ (1 + r)^(t − 0.5)

Mid-year convention; r = IP-specific discount rate; n = remaining useful life.

When we use it: Any IP with identifiable cash flows.
Key inputs: Revenue and margin forecasts; Discount rate; Remaining useful life
Watch-outs: Highly sensitive to the forecast and discount rate — we always show sensitivity analysis.

Incremental cash flow (with-and-without)

We compare the business's cash flows with the IP against a hypothetical scenario without it. The difference — a price premium or cost saving — is the IP's contribution.

IP cash flowₜ = CF_with,ₜ − CF_without,ₜ

When we use it: Process patents that reduce costs, designs that command a price premium, non-compete agreements.
Key inputs: Premium price or cost-saving evidence; Volume forecasts
Watch-outs: Requires a credible 'without' scenario; easy to over-attribute general business advantages to the IP.

Multi-period excess earnings (MPEEM)

We take the earnings of a business, subtract a fair return on every other asset it uses (working capital, equipment, workforce, other IP), and attribute what remains to the primary intangible.

Excess earningsₜ = After-tax EBITₜ − Σ Contributory asset chargesₜ

Value = PV of excess earnings + tax amortisation benefit (where applicable).

When we use it: The primary intangible in a business combination (customer relationships, core technology).
Key inputs: Business forecasts; Contributory asset values and required returns
Watch-outs: Can only be used for one primary asset per income stream to avoid double counting.

Profit split

We divide the profit from the product between the IP and the other contributions (manufacturing, distribution, capital) based on their relative importance.

IP share = Operating profit × IP contribution %

When we use it: Transfer pricing, licensing negotiations, unique IP with no comparables.
Key inputs: Product profitability; Functional analysis
Watch-outs: Rule-of-thumb splits (such as the '25% rule') are cross-checks only and are not relied upon alone.

Discount rate & useful life

The discount rate starts with the company's weighted average cost of capital and adds a premium for IP-specific risk. Useful life is the shorter of legal life (e.g. 20 years from filing for a patent) and economic life (how long the technology stays relevant).

r_IP = WACC + IP risk premium; WACC = E/V·kₑ + D/V·k_d·(1 − t)

kₑ = R_f + β·ERP + size & country premia (CAPM build-up).

When we use it: Every income-based valuation.
Key inputs: Risk-free rate; Equity risk premium; Beta; Capital structure; Legal & technology life evidence
Watch-outs: The IP premium must be reasoned and documented, not a plug figure.

Relief-from-royalty

If you didn't own this IP, what royalty would you have to pay to use it?

Relief-from-royalty (RfR)

Owning IP 'relieves' you from paying a royalty to someone else. We estimate that royalty on forecast sales, deduct tax, and discount the savings to today.

Value = Σₜ [Revenueₜ × Royalty rate × (1 − tax)] ÷ (1 + r)^(t − 0.5) + TAB

TAB = tax amortisation benefit, included where the asset is tax-amortisable for a hypothetical buyer.

When we use it: The most widely used method for patents, trademarks and software.
Key inputs: Revenue forecast; Royalty rate (from comparables and Georgia-Pacific analysis); Tax rate; Discount rate; Useful life
Watch-outs: Royalty rate selection drives the answer — we document the comparable set and every adjustment.

Georgia-Pacific factor analysis

A structured review of 15 factors — such as existing licences, exclusivity, profitability, commercial success and the parties' bargaining positions — used to move a benchmark royalty up or down.

When we use it: Royalty selection and reasonable-royalty damages.
Key inputs: Licence history; Market and competitive evidence; Party-specific facts
Watch-outs: Qualitative by nature; we score each factor and explain its directional effect.

Real options

For uncertain, early-stage IP, owning it gives you the right — but not the obligation — to commercialise later.

Black-Scholes option model

We treat the IP like a financial call option: the 'stock price' is the value of future cash flows, the 'strike price' is the investment required to commercialise, and volatility reflects uncertainty.

C = S·N(d₁) − K·e^(−rT)·N(d₂); d₁ = [ln(S/K) + (r + σ²/2)T] ÷ σ√T, d₂ = d₁ − σ√T

When we use it: Pre-commercial patents in pharma, biotech and deep tech.
Key inputs: PV of expected cash flows (S); Commercialisation cost (K); Time to decision (T); Volatility (σ); Risk-free rate (r)
Watch-outs: Volatility of a single patent is hard to observe; we derive it from comparable companies or simulation.

Binomial / lattice model

A step-by-step tree of how the IP's value could move up or down over time, letting us model decisions at each stage (abandon, continue, expand).

u = e^(σ√Δt), d = 1/u, p = (e^(rΔt) − d) ÷ (u − d)

When we use it: IP with staged investment decisions or the option to abandon.
Key inputs: As for Black-Scholes, plus decision points
Watch-outs: More flexible than Black-Scholes but requires careful specification of the decision rules.

Decision-tree analysis

We map each development stage (e.g. clinical Phase I, II, III, approval) with its probability of success and cost, and weight the outcomes.

Expected value = Σ (Probability of path × PV of path cash flows) − PV of stage costs

When we use it: Drug candidates, medical devices, regulated technologies.
Key inputs: Stage-wise success probabilities; Stage costs and timelines; Launch economics
Watch-outs: Success probabilities should come from published industry benchmarks, adjusted for the specific asset.

Supporting & specialist methods

Tools that sharpen the answer, express uncertainty, or address specific asset types.

Monte Carlo simulation

We run thousands of scenarios with key inputs drawn from realistic ranges, producing a probability distribution of value rather than a single number.

Outputs: P10 / P50 / P90 values and the probability that value exceeds a threshold.

When we use it: Wherever uncertainty is material — financing, portfolio decisions, early-stage IP.
Key inputs: Distributions for revenue, royalty rate, life, discount rate
Watch-outs: Outputs are only as good as the input distributions; correlations between inputs must be modelled.

Risk-adjusted NPV & VC method

rNPV multiplies each year's cash flow by the probability of reaching that stage. The VC method works back from an expected exit value using a target return.

rNPV = Σ pₜ·CFₜ ÷ (1 + r)ᵗ; VC value = Exit value ÷ (1 + target IRR)ᵀ

When we use it: Life sciences, startups, pre-revenue technology.
Key inputs: Stage probabilities; Exit multiples; Target returns
Watch-outs: Avoid double-counting risk through both probabilities and a high discount rate.

Brand valuation (ISO 10668)

ISO 10668 requires financial, behavioural and legal analysis. We combine royalty relief or price premium with a brand strength index that scores awareness, loyalty, protection and momentum.

Brand value = PV(Brand revenue × Royalty rate adjusted by BSI × (1 − tax))

When we use it: Trademarks, corporate and product brands.
Key inputs: Brand revenues; Market research; Trademark registrations
Watch-outs: Brand strength scores must be evidenced by data, not opinion.

Qualitative patent scoring

A structured scorecard across legal, technical and commercial strength: claim breadth, forward and backward citations, family size, geographic coverage, remaining life, litigation and opposition history, enforceability, design-around difficulty and market size.

Score informs royalty-rate positioning, discount-rate premium and useful-life assumptions; aligned with DIN 77100.

When we use it: Every patent valuation and portfolio triage.
Key inputs: Patent documents; Citation and family data; Legal status; Market data
Watch-outs: A score is not a value — it is an input that must be translated into the financial model transparently.

Litigation damages

Reasonable royalty estimates what a willing licensee would have paid; lost profits measures sales and margin the IP owner lost because of infringement.

Lost profits = Lost units × Incremental margin + price erosion; Reasonable royalty = Infringing base × rate

When we use it: Infringement and misappropriation disputes.
Key inputs: Infringing sales; Owner's capacity and margins; Licensing evidence
Watch-outs: Causation and apportionment must be demonstrated, not assumed.

Bringing it together

Reconciliation: from several methods to one concluded value

Different methods answer the question from different angles. We weight each indication by the quality of its inputs and its relevance to the asset and purpose, and explain every weight. The result is a concluded value and a low / base / high range, accompanied by sensitivity analysis on the assumptions that matter most.

Illustrative reconciliation (₹ crore)

Relief-from-royalty

₹4.20 · 50%

With-and-without

₹4.80 · 30%

Replacement cost

₹2.90 · 20%

Weighted concluded value₹4.12 Cr

Reconciliation data
Method	Value (₹ Cr)	Weight
Relief-from-royalty	4.2	50%
With-and-without	4.8	30%
Replacement cost	2.9	20%

Our reports are preliminary valuations for decision support, prepared by one analyst and reviewed by another. They are not certified or statutory valuations; where you need one, an independent registered valuer can review our workings. See also Standards & compliance.

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Reconciliation: from several methods to one concluded value