The valuation of intellectual property is frequently a significant issue in the damages phase of disputes between companies in innovative industries. The selection of appropriate valuation methods, and the application of those methods to the specific facts of the dispute, present challenges to the damages expert and to the finder of fact (whether this is a judge, jury or arbitral tribunal). These challenges may be especially acute in disputes involving intellectual property assets that have not been incorporated in a commercialised product as of the date of the conduct at issue (for convenience, we refer to this as ‘early-stage intellectual property’). In this article, we review some of the sources of these difficulties and methods that may be considered to value early-stage intellectual property.

Early-stage valuation issues can arise in damages quantification in a variety of contexts. For example, a company conducting research and development toward the possible introduction of a future product may allege that a rival has misappropriated confidential information that could enable it to introduce a competing product in the future. The owner of the confidential information may seek compensation for the diminution in the value of its prospective business opportunity, or disgorgement of the prospective gain experienced by the rival. Alternatively, a party to a collaborative product development agreement may allege that its counterparty breached the contract by shirking its development obligations, resulting in a decreased prospect of technological or marketplace success.

Oct-Dec 2019 issue

Charles River Associates