2 Objectives and background

This guide intends to provide clarity and direction on the valuation of IP. It aims to equip technology transfer and innovation professionals with the tools required to determine a monetary value for IP. To this end, this guide will navigate the different approaches used to value IP, with the primary aim of familiarizing you with generally recognized concepts and principles, and enabling you to negotiate with other parties. This includes negotiations with those seeking to acquire IP through sale or licensing, as well as with investors and research funders.

This section sets the scene, allowing you to understand the landscape in which IP valuation is used for technology transfer, and the nuances of valuing IP at different levels of maturity and in different sectors. In addition, we discuss how IP valuation in industrializing and middle-income countries differs from approaches used in developed economies in an academic and research setting.

Early-stage IP valuation and international valuation standards

Valuing IP emerging from universities and research institutions poses unique challenges compared to traditional asset valuation conducted in mature, cash-flow-positive businesses. Established entities, for which standards like those published by the International Valuation Standards Council (IVSC) are primarily intended, typically benefit from clear historical data, predictable cash flows, market comparables and established business models. This allows adherence to robust, standardized valuation frameworks that greatly enhance transparency, comparability and credibility across markets.

In contrast, IP valuation within the knowledge and technology transfer context often deals with early-stage technologies characterized by significant uncertainty and risk, limited or no historical financial data, and highly speculative future market performance. Typically, IP assets generated by research activities are assessed at relatively low technology readiness levels (TRLs 1–4), where traditional valuation methods often yield overly broad and uncertain valuation ranges. As a result, valuations must rely extensively on defensible assumptions, scenario-based forecasting, expert judgment and an understanding of market potential, essentially blending rigorous analytical approaches with informed intuition and contextual sensitivity.

While organizations like IVSC actively seek to harmonize and standardize valuation practices globally, their standards inherently presume a degree of asset maturity and data availability that early-stage research IP typically lacks. Recognizing this, our guide explicitly adopts a pragmatic approach, emphasizing flexible, scenario-driven methodologies tailored to early-stage IP realities. Rather than diminishing credibility, this tailored approach better captures the inherent uncertainties and dynamic nature of research-derived innovations.

It is important, however, to view these valuation approaches as complementary rather than contradictory. The IVSC standards represent a desired endpoint toward which early-stage IP valuations can gradually move as technologies mature and more reliable financial, market and operational data become available. This progression aligns valuations initially based on expert assumptions and scenarios with standardized quantitative methods increasingly supported by robust market evidence and historical performance data.

Practically, technology transfer professionals are encouraged to conduct valuations iteratively throughout a technology’s lifecycle. Initially, qualitative assumptions and scenarios provide foundational valuation insights; over time, as IP matures (advancing to TRLs 6–9), professionals should progressively integrate more quantitative methodologies, aligning more closely with established international valuation standards. This iterative approach ensures smooth transitions from qualitative and scenario-driven early-stage valuations toward quantitatively rigorous, standardized valuations appropriate for mature technologies.

By explicitly recognizing and articulating these complementary approaches, this guide seeks to bridge the perceived gap between practical early-stage IP valuation methods employed by technology transfer offices and the rigorous, standardized frameworks advanced by international bodies like IVSC. Ultimately, both approaches share a common goal: to empower stakeholders with credible, transparent and defensible valuation insights that facilitate informed decision-making across all stages of technological maturity.

Valuing intellectual property for technology transfer

Before you conduct IP valuation to support technology transfer, it is important to ask a range of questions that explore motivation and context. These include, but are not limited to:

• Why is IP valuation required?

• For what will the valuation be used?

• Who is interested in the value and why?

• What are we valuing?

• Under what legal context are we undertaking this activity?

• What are the commercial and financial factors that allow us to select the most appropriate valuation methodologies for particular IP?

Once you have robustly evaluated the IP under scrutiny, you might proceed to valuation for several reasons including:

Structuring a licensing strategy or deal – typically between a research-intensive university that has generated promising IP, and a company (typically a large one) seeking to in-license this IP into their portfolio.

Assigning an IP asset – when IP is sold or ownership is transferred to, for example, the inventor or a new owner.

Raising funds – when a university spin-out is seeking to raise investment to facilitate the development of an IP into the market, and at a later stage, its growth and expansion into new markets. In addition, IP assets are increasingly used as collateral to secure bank loans.

Managing portfolios in a non-deal-orientated capacity – often undertaken by academic or research organizations with large IP portfolios to optimize their use of resources and focus commercialization efforts on the most promising IP.

Analyzing tax and transfer pricing – tax authorities increasingly notice IP as a taxable asset, and will require companies to report on its value when completing tax forms.

Litigating a claim – when there is a possibility that IP infringement has occurred, valuation may form the basis for legal resolution, and for awarding damages.

It is important to note that IP valuation does not take place in isolation. Often, the IP under discussion is made up of several tangible and intangible assets, which together constitute a technology or product. This product might also include other intangibles such as trade secrets and know-how, which may be required, to successfully take the technology to market. IP valuation therefore requires a holistic approach, considering other intangibles and factors that ensure the underlying technology can be commercialized.

Valuing intellectual property in the knowledge economy

Innovation is universally seen as a key driver to development. Through innovation, economies globally have shifted from being industry based to knowledge based. More recently, they have entered the digital age, in which interconnectivity, artificial intelligence, robotic autonomy, crypto-assets and countless other new technologies are changing how we live. These trends require the creation of IP-focused markets and instruments that facilitate the evaluation, valuation and trading of IP assets.

New laws are being created to accommodate changing economics and to facilitate trade and growth. A major challenge to this trend is a lack of transparency and homogeneity with respect to the application of IP valuation. Part of this challenge is unfamiliarity with IP and intangible asset valuation, particularly in industrializing economies. Because of this, trading of IP assets remains anemic in those countries where the need is greatest, slowing down their shift toward knowledge-based economies.

Many jurisdictions are steadily professionalizing IP valuation approaches, and their tax authorities, to better serve companies and ensure more accountability. That said, several challenges to robust IP valuation persist. These include:

Perception of value – although IP is considered an asset, valuation of company assets in many cases continues to favor tangible assets such as property and machinery. IP is often grouped into “other” assets with little attempt to shed light on its value.

Implementation of international standards and practices – this is only effective when local business and judicial norms are considered. A translational step is required, in which some of these international approaches are modified or adopted in a staggered fashion that lowers the barrier for users, companies and other stakeholders.

Litigation – in developed economies, the perception is that outcomes for IP-related cases (such as infringement) will result in court-ordered recompense for a successful claimant. In many industrializing countries, such awards are rare and, when awarded, often rely on the court’s discretion rather than an objectively determined value of damages.

Professional valuation – professionals charged with valuing assets often focus on tangible assets and may not be familiar with IP valuation approaches. As a result, IP is often under- or overvalued.

Perception of value in industry

Recently, the perception of value has shifted. The largest technology-driven companies are seen as more valuable in monetary terms than their counterparts in sectors such as manufacturing. This trend is driven by a high perception of value for intangible assets such as IP, human capital and reputation. As a result, innovation productivity is a high priority for companies, which are investing heavily in generating IP assets by collaborating with partners, universities and smaller peers or competitors. These companies have embraced “open innovation” and innovation management practices that allow them to adapt to shifting sands and remain relevant in the new age.

A growing trend in technology transfer is to circumvent the long laborious process of detailed IP valuation with an expedited “peer-review” approach. With this approach, technology transfer offices (TTOs) engage with their peers in other institutions and industry partners to discuss IP under valuation. The peer network offers its opinion on the value of IP and, much like in academic publications, the peer-generated value becomes the de facto value of an IP.

The goal is to depend more on the experiential expertise of professionals in the first instance, before a more elaborate method is deployed, or needed. This peer-review approach takes place at the institutional level (the academic inventor, other technology transfer managers, etc.) as well as in the ecosystem (potential licensees, investors, etc.). While this approach may seem to expedite the valuation process, it does not fare well under scrutiny and is unlikely to be sufficient for securing financing from investors or banks.

Evaluation of intellectual property using qualitative analysis

To determine the commercial potential arising from IP, one must first evaluate the opportunity for its development against several criteria. After all, it is likely that significant resources will be invested in an IP’s development and route-to-market. Valuation for the purpose of commercializing new IP tends to be useful only after a robust evaluation of the opportunity – which may therefore be considered as an input into subsequent valuation of the IP.

Since the output of an opportunity evaluation is non-monetary, it can be used to determine the utility of the IP under discussion, and point to one “route-to-market” strategy over another. Qualitative evaluation is often used by peer companies when considering in-licensing opportunities, as well as academic institutions when determining the commercial potential of IP.

Qualitative evaluation focuses on scoring or rating IP against four core criteria: market, technological, legal, and other intangibles such as human capital (team, competencies, capabilities, motivation and others). We discuss these criteria below.

Assessing market impact, and potential target markets for IP, may require analysis of the technology landscape – to understand how an IP under scrutiny compares to analogous solutions in development, or in the market. It can indicate the usefulness of the IP, how easily it might be adopted in target sectors and, crucially, the range of applications in which the IP may be deployed. Analyzing the technology landscape also provides a measure of the technological disruptiveness of the IP in the market.

Determining the quality of an IP also gives an indication of whether it is technology ready and, as a consequence, what resources are needed (in terms of time, capital, skills, equipment, etc.) to develop the IP into a market-ready product or service. The IP evaluation process also involves assessing market potential, developing route-to-market strategies and identifying potential barriers to market entry.

In addition, commercial due diligence should uncover market characteristics, supply chain structures, drivers and restraints, and prevailing market trends and dynamics. You, as innovation professionals, can use insights gained from this activity to identify potential competitors and barriers to market entry.

After developing a sound understanding of the quality of the IP, its status and its market potential, you can then assess technical criteria – to more efficiently plan and resource the development process. This involves activities such as developing prototypes, and testing these in industrially relevant environments. Often this means working closely with potential customers to better align the product’s development with customer needs. As a result, you can better meet trialing requirements, and estimate the cost of development, time to market and developmental risk. In addition, it is during this stage that you must pre-empt and address regulatory hurdles, and compliance challenges.

In some instances, it is possible to use the outputs of IP and technology landscaping activities to determine the likelihood and timing of obsolescence, and to identify complementary technologies. For instance, in the fast-moving software sector, it is well understood that new approaches become obsolete relatively quickly – compared to the slower moving biotechnology sector, where drug development can sometimes take several years.

In assessing legal criteria, you can conduct an IP landscaping survey to discover relevant “prior art” and any challenges relating to freedom to operate. This activity allows you to determine an IP’s status and strengths – in particular its novelty and whether it is protectable. In addition, it may help to elucidate an IP’s distinctiveness, which demonstrates its disruptive potential. IP landscaping allows you to understand technological trends in the market and pinpoint relevant IP owners, including those who are investing in or in contrast, divesting in the area.

Assessing the legal landscape is also a useful exercise for identifying potential partners or collaborators, or potential buyers who can be targeted for transfer agreements and licensing opportunities. Crucially, under this criterion, you should carry out due diligence to determine an IP’s legal status, ownership rights and any impediments to commercialization. In addition, this activity determines whether formal filings adequately protect the underlying core IP.

You can use the output of an IP landscape survey to determine the strength of an IP by benchmarking, for example, how the IP compares against others. In the case of patents, several indicators can be scrutinized:

Patent claims – a review of independent and dependent claims that indicate the breadth and depth of the protected invention. Wider and deeper claims, as demonstrated by the number of both independent and dependent claims, may indicate a strong patent.

Age – indicates the remaining useful lifetime of the invention. The younger the patent, the higher it may score.

Citations – the number of granted patents and patent applications that cite the patent in question as prior art. The higher the number of citations, the higher the score.

References – the number of patents and documents referenced by the technology in question. A broad range of references indicates that the patent is based on strong science and is therefore “standing on the shoulders of giants.”

Litigation – strong patents are often fiercely defended by their owners and reflect a competitive market environment.

Patent families – a high number of patent families may indicate a strong patent with significant commercial potential.

Team (innovator or creator) and human capital – the success of the commercialization process is directly dependent on the contribution of the IP creator, particularly in the early stages. Their experiential skills (including non-technical ones) and problem-solving acumen allow the organization to expedite the development process.

Commercialization team – has a major impact on the success or failure of the commercialization process. For example, an experienced serial entrepreneur has a better chance of success than a first-time entrepreneur with the same IP.

Concerning IP creators, the contrast between commercial and academic teams merits further discussion. In the context of a commercial company, research and development (R&D) typically aligns with commercial goals. In contrast, researchers in academia may have tremendous autonomy with respect to their research interests. As a result, they can become conflicted between pursuing academic capital (publishing papers, conducting research for the pursuit of frontier knowledge, teaching, etc.), and commercializing IP (protecting intellectual capital and property, translating research outputs into products and services, etc.).

You, as technology transfer professionals, are tasked with effectively communicating the benefits of commercializing IP to researchers who, at times, have a purist view of the value of research: to better understand the nature of things, rather than to profit from such an endeavor. Fortunately, the tide is shifting. Research funders, that is, governments, charities, foundations, and so forth, increasingly demand that universities demonstrate the impact of research on society, including through the creation of new products, services or jobs, influence on policy making, and other ways that improve the life of the common citizen.

As regards the successful commercialization of IP, this will depend on a range of factors. These include the importance of the IP for the company to which it is licensed (is it core to their business or just a side project?), the amount of inter-functional communication, the quality of human and financial resources devoted to the IP by the company, and the company’s market position, brand name, distribution channels and business model.

Useful indicators that can be used to assess the strength of different forms of IP (other than patents) include:

For trademarks:

Distinctiveness – a crucial indicator of a trademark’s strength. Strong trademarks are inherently special, unique, and easily recognizable, setting them apart from generic or descriptive marks.

Market recognition – the level can indicate a trademark’s strength. Well-known trademarks with a strong reputation and extensive consumer awareness tend to be stronger.

For copyright:

Originality and creativity – essential indicators of the strength of a copyrighted work. Works that exhibit a high degree of individuality and creative expression are more likely to be considered strong copyrights.

Market impact – the impact and influence of the copyrighted work on its respective industry or field can be an indicator of its strength. Works that have made a significant cultural or commercial impact tend to be perceived as stronger copyrights.

For trade secrets:

Confidentiality measures – the strength of trade secrets lies in their ability to remain confidential. The effectiveness of protective measures, such as non-disclosure agreements, non-compete clauses in employment contracts, restricted access and security protocols, indicates the strength of the trade secret.

Competitive advantage – trade secrets that provide a substantial competitive advantage, such as proprietary formulas, manufacturing processes or customer lists, are considered stronger. The economic value and uniqueness of the information contribute to a trade secret’s strength.

For designs:

Novelty and originality – key indicators of design strength. Designs that are unique, non-obvious, and significantly different from prior designs tend to be stronger.

Market recognition and consumer acceptance – can contribute to design strength. Designs that have gained popularity, won awards, or been successfully commercialized are typically perceived as stronger.

It is important to note that the indicators mentioned above are general guidelines, and the specific assessment of IP strength may vary depending on the relevant legal framework, industry context and expert judgment. Each form of IP has its own unique characteristics and considerations, and a comprehensive evaluation may require a combination of qualitative and quantitative factors specific to the respective IP type.

Volatile nature of value in intellectual property

IP valuation, as discussed in detail above, depends on a wide range of factors and variables. In particular, in the context of technology transfer, the IP valuation approaches and methods you choose will depend on the maturity and application area of the IP.

For instance, “proof of concept” funds, otherwise known as translational funding, allow an organization to take early-stage IP and develop it – by creating and testing prototypes, conducting field trials for function and performance, and submitting data for regulatory approval. Negotiation of commercial deals at the late stage of IP development allows the organization to more readily appropriate a significant portion of the future economic value of the IP. In general, the risk associated with IP has an inverse relationship to value as the IP is developed from its early stage to a market-ready product.

The time to market (lead time) and useful lifetime of IP are also, but not only, highly dependent on the industry sector. For instance, it is well understood that for software, development and the subsequent economic lifetime are short. In contrast, the pharmaceutical sector can have exceptionally long lead times, where a drug can take more than 10 years to get from discovery to market. Development incurs high capital expenditure, attrition, and other risks, which must all be considered. As a result, valuation in this sector requires sophisticated methods that estimate the value of IP over a longer time horizon than that for software.

This guide provides a comprehensive overview of four different valuation methods and allows you to apply those that suit your current situation. Some methods are more easily accessible than others, which may require more specialist support in order to use them appropriately.

The guide allows you to evolve and adapt your approach, as you develop your valuation skills through practice, and paves the way for you to access and use sophisticated approaches to valuation.