A good trademark can add inherent value to a company. When you consider the level of competition and number of choices out there, a distinguishing name, symbol, or phrase is essential to create brand awareness and produce a following. We can easily name a few brand names or symbols associated with everything from computers to cereal. The goal for businesses of all sizes is to develop strong trademarks, and valuing them correctly is paramount to determining overall value for a wide variety of applications, including mergers and acquisitions, venture funding, and taxation purposes.
Types of Trademarks
Fanciful Trademark: This is the most easily defendable. It is a made-up word, phrase, or symbol designed specifically for a brand, product, or service.
Arbitrary Trademark: This is where the word, phrase or symbol has a common meaning, but it is not associated with the type of products and services provided.
Suggestive Trademark: Word, phrase, and symbols that are not meant to directly describe a product or service but shine it in a particular light.
Descriptive Trademark: A word, phrase, or symbol that describes goods or services. It could potentially have a secondary meaning differentiating the business but not necessarily.
Generic Trademark: A word, phrase, or symbol that describes a product category or service. This is not defendable in court.
Valuation Approaches
Every valuation firm will have its own specific formula and set of processes for IP valuation. In general, there are three different valuation approaches. The first is the income approach, which takes the estimated cash flows from the trademark and deducts any risks or costs spent developing it. The second is the market approach. This takes a look at relevant transactions in the market, like buying/selling or licensing, to determine a value. The third is the cost approach. This consists of reviewing the historic cost of creating the trademark and the cost it would take to replace it.
When looking for a valuation firm, consider using a firm that has specialized experience in your industry and has shown relevant success in assessing trademark value. Appraisal Economics is proud to offer IP valuation services that are current with emerging market trends, and we have the skills, expertise, and resources to help your organization determine trademark value for your shareholders, management, and financiers. Given the importance of valuing intangible assets like trademarks accurately, choosing the best firm for your needs is crucial to success.
Contact us today to learn more about our IP valuation services.