Software Portfolio Management and Valuation
In the evolving intellectual property and intellectual asset digital economy, accurately managing software by and within an enterprise is beginning to be ever more critical. Valuation and validation are required by government regulations such as Sarbanes–Oxley and Federal Accounting Standards Board (FASB) 141/142. These force careful governance of intellectual property including software not to mention the acquisition landscape.
Addressing this challenge requires that three questions be answered:
- What software assets have value?
- Which of these software assets can be monetized?
- How much might an institution lend on the software as collateral or how much might an acquiring company establish as fair transaction value?
- First, inventory and triage:
- Organize and understand the software product assets
- Include patents, trademarks, copyrights, domain names, trade secrets & know-how (databases)
- Second, inventory valuation for acquisition:
- Determine the software product inventory's replacement cost value for what it would take to build a competitive product.
- The timeframe to build the replacement
- Determine the technology market valuation
- The patent litigation value (when patents are involved)
- Determines the market value of the infringers and what royalty rates you could receive
- Requires patent and claims evaluation for licensing
- Requires patent landscape evaluation for licensing
- Software technology commercialization value (also called the "Inventory Value" based on what it would take to bring an alternative product to market)
- What is the potential market value of the product and what percentage of the market might this product take?
- Requires patent evaluation for commercialization
- Requires patent landscape evaluation for commercialization understanding market risks, e.g. what is the potential that this technology is infringing on other patents?
- Accurate valuation for your software-based IP
- Improved regulatory compliance
- Improved negotiating position during merger discussions
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