IPthoughts

Tuesday, May 02, 2006

Values of IP

What do you think the most valuable IP right is? Are patent rights the most valuable, or are trademark rights, or copyrights?
My guess is that most patent attorneys think patents are the most valuable of IP rights. Well, let’s look at some data.

Patents –
The ploymerase chain reaction, a technique for amplifying genetic material, was invented by Dr. Kary Mullis in 1983. His employer, Cetus Corp., received the patent; Dr. Mullis was awarded the Nobel Prize. In 1992 Cetus sold its PCR patent portfolio to Hoffman LaRoche for about $700 million.
Recently RIM settled for $612.5 million a lawsuit in which the plaintiff, NTP, asserted that RIM’s BlackBerry personal data system infringed an NTP patent. In view of that, the NTP patent might be said to be worth $1 billion.
These two data points represent, I believe, the top zone of patent value.

Copyrights –
What’s the top zone for copyright values? George Lucas’ Star Wars “franchise,” which includes all the Star Wars related products and spin-offs, has been estimated by Forbes to have a value of about $20 billion.
J.K. Rowlings’ Harry Potter series and related products has been projected to have a value of about $12 billion. So this $12 to $20 billion range is probably a fairly representative estimate of the top zone of values for copyrights today.

Trademarks –
What might some of the best known trademarks be worth?
How about the Microsoft trademark? Last year Microsoft earned more than $12 billion on almost $40 billion in revenues. Of course, a considerable amount of this income and earnings is attributable to the Windows programs and to technical quality. But other software companies have programs of similar quality. Let’s say that one-third of Microsoft’s 31% profit on sales was attributable to its trademark. The company’s shareholder equity last year was a bit more than $48 billion; the stock market valued Microsoft at $284 billion. If a third of the valuation above shareholders’ equity was attributable to the trademark, then the Microsoft mark would have a value of about $75 billion.
How about Johnson & Johnson - what’s the value of the J&J mark? Using an approach similar to the Microsoft valuation analysis, J&J’s profit was about 20% on revenues of about $50 billion, which might be said to be about twice that of its market segment. The excess of its market value over shareholders’ equity last year was about $142 billion; half of that would be $71 billion, which as a ballpark figure would be the value of its J&J trademark.
As a third example of a company in a competitive market with strong earnings, consider Cisco Systems. Its profit last year was about 23% of revenues, which again might be said to be in the neighborhood of twice the average for its market segment. Its market value exceeded its shareholders’ equity by about $110 billion, giving its Cisco mark a value of $55 billion.
So it would seem that marks of highly successful companies might be said to have a value of $50 billion or more.

Conclusion –
From the foregoing analysis, it would seem that trademarks clearly are the most valuable of IP rights.
One notable characteristic of trademarks is that their life is potentially infinite, while the lives of patents and copyrights are both limited by statute. So only trademarks continue to build value with use over the years.
Obviously the above is only a rough approximation of values. I’d welcome your comments about where it went off track, and what you think the most valuable IP right is.

7 Comments:

  • It is interesting that your measure of value only takes into account the value to the IP holder. However, if you take a look at the PUBLIC value of patents vs. copyrights vs. trademarks it would seem to me that society benefits most from patents in terms of accumulated technological value. Copyrights might also offer some public value in terms of entertainment value developed based on the copyrights. I'm not sure what the public value is in trademarks (if any).

    By Blogger blaisemouttet, at 5:48 AM  

  • Trademarks are very important because they allow consumers to easily distinguish between various goods. For most buyers, the source of the good is seen as a strong indicator of quality and realiability of a good. Without trademark protection, knockoff goods could created that are essentially indistinguishable from the real good (until they break two weeks later).

    By Blogger DennisCrouch, at 1:59 PM  

  • Might it be possible that the comparison is like apples and pears?
    You have shown the value range of one patent but some companies own 100- 1000 patents which adds the value of a trademark.

    By Blogger walt, at 11:57 PM  

  • I'm not sure that Star Wars, or maybe even Harry Potter, is an accurate measure of the copyright value of these properties. Certainly, the value of the boxoffice and DVD sales of the Star Wars movies is a copyright issue, and that's no small value, but I'd say that merchandising revenue is more a factor of trademark than copyright, or at the very least a hybrid of the two.

    By Blogger Mike Brown, at 6:58 AM  

  • Jim,

    As some of the posts above allude, the comparison you make is inappropriate. You equate infringement damages in contested patents or older patents sold with the total revenue over years of products protected by copyrights and their peer trademarks.

    Consider some of the most valuable products and their revenue protected largely by patents. For example sales of Pfizer's most popular drugs in 2005:
    Lipitor 12.2B
    Celebrex 1.7B
    Zoloft 3.2B
    Zithromax 2B

    Clearly patents to any of these drugs are worth billions. Pfizer's patent portfolio is on the balance sheet at 27.8B.
    (see SEC annual filing http://www.sec.gov/Archives/edgar/data/78003/000093041306001567/c40966_ex13.htm )

    I also agree with Walt that trademarks are enhanced by all legal protection and commercial promotion as well as activity in the marketplace. Unlike in patents, there is a strong ingredient of goodwill in trademarks even though they are both legally and by accounting rules distinct.

    By Blogger Legal Thespian, at 8:44 AM  

  • Re Blaisemouttet - The public value of trademarks is the value of receiving what the purchaser wanted. One buys Coke, as an example, expecting to get the genuine beverage, not a knock-off or Pepsi.
    Re Dennis Crouch - yes. This was the gist of my reply to blaisemouttet.
    Re Stephen Lozan - I hadn't heard that "Intel Inside" was a $31B tm., or that it was being dropped by Intel. Thanks for this info.
    Re Mike Brown - Yes Star Wars merchandise sales were driven by the movie. That's why I'd lump their value with the Star Wars copyright.
    Re Legal Thespian - Very interesting. I hadn't heard that the value of the Lipitor patent was $12.2B, or that Pfizer values its patent portfolio at $27.8B. Of course, since patents have a finite life, each year their value drops until it is $0 when the patent expires. Anyway, thanks for the info. As an ex-patent atty. it is good to know that some patents have a value in the copyright and trademark range, at least for a time.
    And thanks to all for your interest in the blog, and for responding. Jim Hawes

    By Blogger maui muse, at 1:32 PM  

  • Hello,

    My comment is late, but still... when we speak of revenue from patent, we are speaking of revenue not from one entity or from one point in time. The same patent can get loads of money that are different for each entity who is interested in the technology. Therefore, to judge value of a patent, we need to see the overall value that it has got over its life term.

    Another thing we fail to realize while evaluating "value" is that patents are technical. Trademarks aren't and copyrights needn't be. One cannot look and compare value of a Van Gog work versus a technology that discusses about, say, anti-lock braking system.

    By Blogger V S Vagheeswar, at 3:45 AM  

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