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Kudo & Associates provides valuation services for intellectual property.
Recently, of the total market capitalization, a portion attributable to
intangible assets is on the rise. It can be said that what makes or breaks
a company is its utilization of intangible assets.
For efficient utilization of
intangible assets, corporations need to accurate assess or value them.
For example, without accurate assessment of the value of intangible assets,
there will be difficulties with investment or M&A, in addition to
eroding capacity of efficient asset management. Without accurate IP valuation,
it not only erodes competitiveness of a company but may also have a disturbing
effect of weakening the Corporate Japan across the board.
Sensing the needs of such valuation, Kudo & Associates independently
has developed IP valuation methods (i.e., YKS method/PQ method). YKS method
values the earning power of patents while PQ method assesses the monetary
value of patents. On our homepage, by means of YKS methods, Corporate
Patent Indexes of various companies are disclosed for reference.
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(1)
Realization of assessment of economical values for patent portfolios
(2) By nature
of database, accuracy akin to micro-valuation
(3) High
resolution information from accumulation of filing data
(4) Using
only the objective data, complete elimination of arbitrariness
(5) Valuation
of patent portfolios at low cost
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Philosophy
behind YKS Method
The value of a patent is deemed to lie in its exclusiveness (Article
68 of the Patent Law). YKS method seeks to assess the strength of
this exclusiveness by a certain means. The strength of exclusiveness
in particular means exclusive utilization of an invention by a patentee,
or in other words, exclusion of others. From a competitor, the strength
of exclusiveness is one of the causes for hindering his or her business,
and being aware of this hindrance, the competitor is compelled to
act to remove such hindrance. If one can assess the efforts made by
the competitor to remove such hindrance to his business, one can assess
the strength of exclusiveness of a patent. In the case of such hindrance
to business to the competitor, such hindrance may be materialized
in the form of his actions in regard to the patent. Accordingly, if
one can assess the value of such action in regard to the patent, one
can assess the value of exclusiveness of the patent. |
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Explanation
of YKS Method
From conception of an invention to expiration of a patent, a third-party
may proceed with various actions. YKS Method views these actions as
hindrance to business and assesses the circumstances of such actions.
* Past actions in prosecution history are turned into assessment factors.
YKS Method indexes the hindrance of these assessment factors, which
are information on actions taken by a competitor in prosecution history.
Accordingly, YKS Method offers, while being relative valuation, assessment
of the strength of exclusiveness of a patent with accuracy at par
with micro-valuation. YKS can provide high-resolution valuation information.
* Factoring of assessment factors Factoring of assessment factors
is done by accounting for cost ratios of a third-party in regard to
cost incurred for such actions.
* Exclusion of arbitrariness Assessment factors are limited to actions
taken by a third-party, and actions taken by a patentee is not considered
in principal. Accordingly, the database consists of objective data,
which leads to exclusion of arbitrariness from the assessment process.
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Business
Applications
* Assessment of IP on the basis of inventors, companies, regions,
nations, globally.
* Disclosure of corporate patent index
* Relative valuation of companies in certain sectors
* Market research
* M&A
* Investment
* Finance
* Index for improving corporate IP management
* Data for establishing nationwide IP strategy |
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(1)
Overcoming weaknesses of monetary valuation methods of patents
(2) Assurance
of objectivity without using the concept of a contribution ratio of a
patent
(3) Computation
of inherent patent risks from objective data
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Philosophy
behind PQ Method
PQ Method purports to compute monetary value of a patent from the
prospective of cashflow generated by the patent. For example, even
if there is a superb patent with high inventiveness, its value may
be zero where the patent is not used or will not be used in business.
On the other hand, even if its inventiveness is low, its value may
be relatively high where the patent is currently being used to generate
a substantial amount of earnings.
However, a patent is deemed to have inherent risks and industry-wide
risks. The inherent risks include for example invalidation risks,
technology obsolescence risks and substitution risks. By discounting
these risks from the future cashflow generated by the patent, the
present value of the patent can be computed. In other words, as in
the patent above with low inventiveness, its momentary value can be
computed by discounting by its high inherent risks. |
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Explanation
of PQ Method
* Computation Formula In PQ Method, the present value of a patent
is computed by Formula 1 as below. Ct stands for cashflow generated
by a patent. Alpha stands for industry risks and beta stands for patent
inherent risks.
* Computation method of respective risks Alpha stands for general
industry-wide risks, for example as used in WACC. The computation
method of beta is as follows: First, the remaining term of a patent
is computed based on JPO database. Based on this term, the standard
value for patent inherent risks is computed. Then, the standard value
is adjusted by the characteristics of a patent (e.g., invalidation
risks, scope of rights). Derived from objective as such, beta obtained
is deemed to be an objective representation of patent inherent risks.
* Computation of present value of patent The present value of a patent
is computed by discounting the future cashflow generated by the patent
by industry-wide risks and patent inherent risks. |
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Business
Applications
* Appropriateness of security interest for government assistance financing
* M&A
* Transfer, licensing
* Accounting for intangible assets in balance sheet
* Reference data for financing
* Reference data for IPO |
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The rankings herein are based
on corporations listed in the Tokyo Stock Exchange (First Section).
Corporate Patent Index is computed by YKS Method originally devised by
Kudo & Associates. YKS Method indexes the strength exclusiveness of patents.
It is a method of patent valuation and does not produce results in absolute
terms. Moreover, due to its inherent nature, there may be a slight degree
of error.
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Rankings of major sectors are to be published in
1Q of 2007!
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Bargain Index to be published in 1Q of 2007!
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