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2009 CONSOR 2

Understanding IP Value - Why Value?

Transaction due diligence

ROI assessment

Impairment testing

Litigation

Transfer pricing

Use as collateral

Bankruptcy

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2009 CONSOR 3

Marketing Bundle

Primary trademark

Corporate name and logo

Marketing umbrella

Sub-brand names

Core brand

Copyrights

Secondary trademarks

Packaging design andcopyrights

Trade dress

Characters

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2009 CONSOR 4

Technical Bundle

Key patents

Trade secrets

Formulae

Packaging technology and

sources Shapes and sizes

Process technology

Design technology

Proprietary test results

Plant and production design

Product specifications

Operating platforms

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2009 CONSOR 5

IT Bundle

Platform Software

Data Warehouses

Software Licenses

Source Code

Databases

E-Commerce Sites

Credit/Payment Systems

Shrink Wrap Software Contracts

Mask Works

Data Mining Devices

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2009 CONSOR 6

Context of the ValuationIP Value is Context Specific:

Brand/TM

Patent/Technical

IT/Software

Joint Ventureor Sale

Litigation

InternalDevelopment

LicensingExternal

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2009 CONSOR 7

Other Context Parameters

Time specific parameters

Current value -The value of the assets as they are currentlyemployed

Potential value

- The value of the assets resulting from a newendeavor

Historical value - The value of the assets at a certain point in thepast

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2009 CONSOR 9

Lost Profits

Disgorgement of Profits

Reasonable Royalties

Loss in Business Value

Economic Damages

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2009 CONSOR 10

Economic Damages

Damages Assessment 1 Plaintiffs burden is to prove Defendants revenues stemming from the alleged

infringement Defendant must identify all expenses associated with the alleged infringing sales

activity

Profit Calculation

The court allows for a deduction of a portion of the defendants general expenses,such as overhead, operating expenses, and federal income taxes. This approach ofinterpreting profits is recognized in the Second, Fourth, and Ninth Circuits 2

1 15 U.S.C. 1117(a) Lanham Act.2 Litigation Support Handbook, Russell Parr, p.192.

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2009 CONSOR 11

Case Study #1

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

After-market parts supplier

Litigation

Lost profits

Disgorgement of profits

Loss in business value

Reasonable royalties

Copyright infringement

Revenue projections

Discounted cash flows

Income Approach

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2009 CONSOR 12

Case Study #1 (cont.)

Category Plaintiff Rebuttal

Disgorgement of profits $ 15,000,000 $ 300,000

Lost profits 10,000,000 NA

Loss in business value 20,000,000 150,000

TOTAL DAMAGES $ 45,000,000 $ 450,000

Alternative reasonable royalties NA $ 25,000

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2009 CONSOR 13

Case Study #2

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

Food Manufacturer

Litigation

Lost royalty income

Brand valuation

Trademark infringement

Revenue projections

Discounted cash flows

Income Approach

Relief from Royalty

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2009 CONSOR 14

Case Study #2 (cont.)

Category Retail Food Foodservice Total

Infringing sales $ 850,000,000 $ 975,000,000 $1,825,000,000

Royalty rate 4.5% 1.5% NA

LOST ROYALTIES $ 38,250,000 $ 14,625,000 $ 52,875,000

BRAND VALUATION $ 35,000,000 $ 50,000,000 $ 185,000,000

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2009 CONSOR 15

Case Study #3

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

Auto parts manufacturer

Litigation

Lost profits

Reasonable royalties

Breach of contract

Trademark infringement

Revenue projections

Discounted cash flows

Income Approach

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2009 CONSOR 16

Case Study #3 (cont.)

Category Plaintiff Rebuttal Variance

Lost Profits:

Breach of contract

Counterfeit units

$ 360,000420,000

$ 540,000215,000

$ (180,000)205,000

Unjust enrichment (post-termination)

Less: mitigation

635,000

0

1,250,000

(1,310,000)

(615,000

1,310,000

TOTAL DAMAGES $ 1,415,000 $ 695,000 $ 720,000

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2009 CONSOR 17

Case Study #4

Company:

Context:

Components:

Cause:

Approach:

Concept of Value:

Conglomerate

Litigation

Valuation of stock distribution

Valuation of dividend income

Valuation of payments

Valuation of retirement benefits

Trademark infringement (Celebrity)

Discounted cash flows

Income Approach

Enterprise Valuation

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2009 CONSOR 18

Case Study #4 (cont.)

Category Estimated Value

Stock distribution $ 200,000,000

Dividend income 85,000,000

Payments 30,000,000

Retirement benefits 10,000,000

TOTAL VALUE $ 325,000,000

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2009 CONSOR 19

IP Valhalla

Brands

Oldsmobile

Blatz

Commodore

Eastern Airlines

Technology

5 Floppy Disks

8 Track Cartridges

Analog Cell Phones

IBM Selectric