IP Valuation During Divorce Proceedings

Statistics show that anywhere from 40% to 50% of marriages end in divorce. During a divorce, the couple divides assets, including homes, furniture, vehicles, and possibly intangible assets, such as intellectual property (IP). However, discovering the value of IP can be a complicated process. It becomes even more complicated when IP owners enter an engagement with preconceived notions.

IP valuation relies on many details for an appropriate and credible result. The same holds true when IP owners face a divorce. However, the details necessary for a credible and defensible valuation in the context of divorce proceedings involves considerations that may be different from that of another context in which the IP is valued. In fact, every IP valuation involves details that are pertinent to that particular entity; thus, making every single valuation unique in its own right. However, oftentimes, an IP valuation in the context of divorce proceedings often presents its own challenges.

The following five aspects make IP valuations during a divorce challenging:

1. False expectations. Many times, IP owners assume the value of their IP is much higher than its actual worth. Therefore, they enter into an IP valuation engagement with a particular value amount in mind. However, a credible valuation analyst reviews all aspects of intellectual property to determine an accurate value. Oftentimes, the amount the IP owners expect a valuation to reveal is considerably understated compared to their expectations.

2. Stage of IP. Most often, the IP is in the early stages of development. Therefore, it is often unproven. Without a workable invention and/or market acceptance, it is likely the IP does not hold much value.

3. Battle of valuation experts. Many valuation practitioners may seem appealing. However, without good knowledge of the industry and what IP valuation entails, IP owners may mistakenly choose a firm that does not have the background needed to provide a fair value determination on the IP at issue. This may lead to a contentious legal battle among valuation experts hired by opposing parties, thus increasing the cost of litigation.

4. Personal goodwill. There might be a certain element of personal goodwill attributable to the IP. This means that one party may have more invested in the IP, such as relationships, skill, knowledge, reputation, and others that an IP valuation analyst would have to consider in the valuation. However, in the event of a divorce, the personal goodwill may not matter if a judge determines an asset should be split evenly.

5. Capitalization. IP often requires a certain degree of capitalization, which gets cut in half as soon as the divorce takes place.

As indicated, IP owners must consider aspects about their IP and a potential valuation in divorce proceedings to determine whether hiring a valuation expert is worthwhile. As listed, many of these aspects can be disappointing, which is why IP owners going through a divorce often forego an IP valuation. They may not want to split assets based on their level of individual goodwill. They may not want to spend the money for an IP valuation to discover that the IP has no value. Either way, a competent IP valuation analyst would bring up these aspects the moment IP owners request an engagement. From there, the IP owners can determine whether a valuation is worth their time and money.

Fake Ads Wreak Havoc on Reputation

Brand names play a significant role in recognition for companies. Popular brand names that live up to their reputations attract more attention from consumers than brands that are not recognized or that do not live up to their name. However, even the best brands face negative publicity or become victims of fake stories. Recently, Fisher Price became the victim of a fake ad on social media.

Social media can play a big role for companies who want to promote their brands. After all, there are more than one billion users on social media. Therefore, social media creates lots of exposure for advertisements. Further, sites such as Facebook can target specific consumers with interests that match products or services advertised.

However, social media is prone to fake ads and news. In addition, it gives consumers the opportunity to express themselves, which could further exacerbate a non-existing problem, making it a disaster. Such are the risks that companies face when they become victims of fake advertisements.

Fisher Price was recently a victim of fake advertising when an advertisement reached social media with a new toy. Showcasing a Happy Hour Playset, the ad depicts a setting of toddlers surrounding a toy bar complete with toy beer bottles. While many viewers realized the ad was fake, other viewers became offended and reached out to Fisher Price. The difficulty today is that many ads and news stories may appear to be true. Therefore, viewers may not always know what is true and what is not, especially when the ad captures the look and feel of the real thing.

The fake ad creates a lot of work for Fisher Price in trying to convince viewers that it has no part in such an ad or that it does not condone a drinking playset for children. What has been a reputable brand name for years can easily be tarnished by a fake ad that is likely meant to be harmless. Since the ad can reach hundreds of thousands of people, it can be difficult to assure all viewers that the real-looking ad is not real. As a result, it could lower the value of the brand if consumers start to view it negatively and turn to other brands instead.

While many fake ads may be created out of boredom as a humorous prank, they represent nightmares for brand names.

Arnold Palmer’s Value Lives On

On September 25, 2016, the professional golf industry and its fans lost one of the greatest golfers in history. Nicknamed The King, Arnold Palmer played a critical role in the golf industry as a trailblazer, changing the way the world viewed the sport of golf.

During Palmer’s career, spanning more than six decades, he won 62 PGA Tour titles, 7 major titles, the PGA Lifetime Achievement award, and became one of the first inductees into the World Golf Hall of Fame. While his accolades are remarkable, Palmer’s role in the golf industry was more considerable than that of a golfer, in which he earned $7 million. He devoted his life to the sport of golf by designing hundreds of golf courses around the world, making golf a televised event, co-founding The Golf Channel, owning the Bay Hill Club and Lodge, among others.

At the time of his death, Palmer’s net worth was $700 million, making him one of the top ten richest athletes in the world. As is the case with many athletes, he accumulated the majority of his wealth beyond his athleticism. As already mentioned, he delved into a variety of avenues that involved golf beyond playing on the course. However, one of the biggest ways he earned his riches was through endorsements. In fact, he is among the top three athletes to make the most money via endorsements, falling behind only Michael Jordan and Tiger Woods at $1.3 billion. His charisma, skill, and likeability made him a top choice for promoting products. Companies he worked with include the likes of Coca-Cola, United Airlines, Westin, Holiday Inn, Ford, Pennzoil, and many others. At the time of his death, Palmer was still endorsing products!

In addition to his earnings as a professional golfer, his endorsements, and his golf course designing projects, Palmer launched wine and apparel products. He also had a drink named after him, in which the Arizona Beverage company distributes today, earning $200 million in 2015 alone.

As with the death of any notable athlete or celebrity, value tends to rise in the short term due to nostalgia. Nobody likes to lose a person; therefore, fans grab as much product as they can immediately following a death so they can hold on to something in remembrance. In Palmer’s case, his wine, apparel, and tea are likely to experience a spike in sales. In addition, he has a book that is set for release on October 25. Sales are likely to be higher than anticipated as a result of his death. In fact, the book soared to #1 on Amazon at the news of his death, despite the fact that it hadn’t been released yet.

Palmer leaves behind a big footprint in the golf industry. His name, products, and legacy will live on for years as a result, contributing to his value long after his death.

Olympic Mishap Affects Brand Image

The Olympics can bring much fame to athletes, especially to those who score medals. Ryan Lochte is such an athlete. He is one of the world’s most famous swimmers, earning 12 medals in the Olympics with six gold, three silver, and three bronze medals. His earnings make him one of the most decorated swimmers in Olympic history. All of this bodes well for brand image. However, Lochte’s actions while at the 2016 Olympics affect his brand image differently.

Brand image is all about perception. Consumers choose brands based on good experiences with products or people. If a brand touts that it is superior to other brands, and consumers find that this is true or believe it to be true, they continue to trust that particular brand. However, when a product fails, consumers begin to question its validity and seek another brand to take its place. This is why it is important for celebrities, such as Ryan Lochte, to maintain a good image.

At this year’s Olympic games, Lochte made up a story that made national news. Later, he confessed to embellishing the story. This leaves the public questioning his validity, making it harder for them to support him. Therefore, Lochte lost four major endorsements from Speedo, Ralph Lauren Corp., Syneron-Candela, and Airweave. Companies notoriously drop celebrities for bad behavior as they do not want to be associated with it or appear that they condone it. If they condone the bad behavior, then the public is likely to question the companies’ choice in a spokesperson, making it more likely that the public will choose other products in disagreement.

Therefore, Lochte’s actions affect his own brand image, making him less marketable. While he has earned many awards, people often remember other people more for their misdeeds because these come more shockingly. Thus, Lochte may be a decorated swimmer, but the shock value of his misdeed may harm his brand image for years to come. However, some celebrities overcome misdeeds (e.g., Tiger Woods, Michael Phelps, etc.) and eventually recover. Yet, this takes time. Ryan Lochte may have a bit of a break as he is slated to compete on “Dancing With the Stars.” This highly popular show will keep him in the limelight, for which he must be on his best behavior in order to redeem himself. Further, Pine Bros., a cough drop company, recently endorsed Lochte, claiming that the corporate world is too reactive and harsh.

Time will tell the damage to Lochte’s brand image. For now, he gets a few lucky breaks, but he doesn’t completely escape the havoc already done to his image. Perception is everything to a brand.

5 Ways P&A Is a Thought Leader in the IP Valuation Industry

As you know, Pellegrino and Associates is a premier intellectual property firm. We provide a variety of IP valuation services including copyright valuations, patent valuations, trade secret valuations, trademark valuations, early-stage valuations for both entrepreneurs and investors, software valuations, and tax valuations. We also determine royalty rates, testify in court as expert witnesses, and much more. While other IP valuation firms offer similar services, we thought we would highlight some of the criteria that make us a thought leader in the IP valuation industry.

1. Increased presence in the litigation setting.
Over the past few years, the number of law firms seeking our services has increased exponentially. This reaffirms how important IP valuations are in settling disputes. It also indicates our IP valuations and expert witness testimonies withstand scrutiny. In fact, one North Carolina Court stated that our firm’s work is “clearly in the mainstream of IP valuation methodologies” and that our qualifications are “outstanding.”

2. More than 350 engagements. Our firm boasts more than 350 engagements for more than 200 clients within every major industry sector. We have worked with Fortune 100, Fortune 500 companies, early-stage companies, individuals, law firms, and others. A few of the companies we have worked with include IBM, GE, Lockheed Martin, and others. The broad range of companies and repeat companies who seek our services affirms our position in the IP valuation industry.

3. IP valuation guide. Pellegrino & Associates president Mike Pellegrino has authored two editions of BVR’s Guide to Intellectual Property Valuation. He objectively captures the process for the valuation of intellectual properties in these guides, revealing the techniques that result in credible, defensible, and precise IP valuations. More than 700 of the guides have sold to a variety of customers, including attorneys, business valuation firms, competing IP valuation firms, tech transfer officers, and more. Given that few IP valuation guides exist on the market that detail the nuances associated with the valuation process further proves that our expertise is top level.

4. International presence. Our reputation as a premier IP valuation firm has landed us many opportunities on an international level. We have taught on IP valuation to officials from the governments of Brazil, Azerbaijan, Estonia, Thailand, Guatemala, and New Zealand on behalf of the U.S. State Department. Our finance- and software-related articles appear in internationally and nationally recognized outlets, such as IAM Magazine, CFO Magazine, MSNBC.com, FoxNews, and others. Also, a law firm has hired us to assist in international litigation.

5. Industry standards. We help set industry standards. Company president Mike Pellegrino was instrumental in helping to change Indiana law regarding the valuation of embedded application software for personal property tax reporting purposes and for the taxation of patent-derived income. He also authored a substantial portion of the administrative rules that Indiana’s Department of Local Government and Finance now uses to administer the evaluation of software appraisals for property tax matters.

These five criteria are just a few ways that our company holds thought leadership status and provides exceptional services in the IP valuation industry. Browse our website or contact us today to learn more.

Five Reasons to Hire an IP Valuation Firm

Intellectual property creates tremendous value for companies and individuals. The value amount varies among the different types of intellectual property. Therefore, determining the value of the entire intellectual property industry is impossible. Intellectual properties exist in several forms, including patents, trade secrets, trademarks, and copyrights, which equates to millions of assets. Without performing due diligence on each and every asset in existence, determining the value of the entire industry is unrealistic. This is because the purpose of the assets, the benefits they bring to consumers/companies, the type of assets, and many other reasons determine value. For instance, a trademark for a soft drink may not command near the value applied to a car that it does for fruit-flavored, sugar-sweetened water. To use a soft drink brand transaction as a basis for establishing the value of a car’s brand is not appropriate either–the two are altogether different in their application and industry.

While determining the value of the entire intellectual property industry is unrealistic, determining the value of individual assets and/or portfolios is paramount. Companies seek IP valuations for a variety of reasons. The following identifies five reasons to seek IP valuation services.

1. Capital formation. Many businesses or individuals seek to raise capital in order to develop an idea, start a business, or to get an invention to market. Capital formation is an especially important step for startups. However, in order to get investors to invest in a particular idea or business, IP asset owners must provide an idea of what their assets are worth. Otherwise, investors won’t invest in something for which the value is not known. It is too risky.

2. Bankruptcy. Just because a company goes bankrupt doesn’t mean that its assets are no longer valuable. By obtaining an IP valuation, a company can determine whether to sell assets to pay creditors or how to properly divide its assets among parties.

3. Expert Witness Testimony. IP valuations provide strong evidence in the court of law. IP valuation analysts spend considerable time reviewing and understanding the assets under consideration. They have to in order to provide a credible valuation. Therefore, hiring an IP valuation analyst can help provide strong evidence in the court of law.

4. Litigation consulting. Law firms hire IP valuation analysts to assist them in determining the worth of assets. Lawyers, plaintiffs, and defendants alike use valuations to give an accurate, unbiased view to present to the court system.

5. Tax valuation. Tax disputes arise often when parties disagree on an asset’s worth. IP valuation analysts provide an unbiased view that can help settle such disputes. IP valuations are also ideal for moving assets that could have tax implications.

As you can see, there are strong reasons to seek an IP valuation firm. At Pellegrino & Associates, we have conducted IP valuations for all of these reasons and more. To learn more about how we can help, contact us today!

Royalty Rate Determination Process

Intellectual property (IP) licensing is big business. So big that it has become a $40 billion industry, according to IBISWorld. IP licensing affords IP owners a way of making revenue while maintaining rights to the IP. It allows them to offer their IP under negotiation to other businesses who want to use an invention that they didn’t create themselves. Therefore, in exchange for a fee, such as a royalty rate, the businesses can remain competitive.

However, determining royalty rates can be a challenging task. The following outlines the four-step process in determining royalty rates.

1. Identify key IP rights. IP valuation analysts determine the key rights that are subject to the royalty rate analysis. Therefore, the analysts seek to understand all fields of use, geographic restrictions, exclusivity restrictions, and others.

2. Identify value proposition of IP rights. The analysts determine the actual micro-economic value proposition associated with the rights afforded by the license grant. This entails quantifying the economic impacts of the IP rights.

3. Identify contributions of licensor and licensee. IP valuation analysts determine how each party contributes to the value of an IP. While the licensor naturally owns the IP rights, a licensee also brings value to the table through sales and distribution, manufacturing capability, and others. In order to apportion the contributions in an equitable manner, the analysts must identify what both parties bring to the transaction.

4. Apportion value based on licensor and licensee. The final, and easiest step, is to apportion the value. However, the analysts cannot perform this step without following the three previous steps. Without the other steps, the analysts would not have all of the details necessary to provide a reasonable royalty rate determination.

As shown, the royalty rate determination process takes four steps, but these steps require serious insight. At Pellegrino & Associates, we have years of experience determining royalty rates. Contact us today for more information!

Brands Capitalize on Election Year

When a hot topic consumes the public, it brings forth a host of opinions, debates, publicity, and interest. It’s all everyone talks about–or so it seems. Election years bring nonstop conversations and media attention. Few people escape election years without being bombarded with advertisements, commentary, or discussions about an upcoming election. Therefore, brands that integrate their way into everyday discussions can create more exposure.

Election years can stifle company advertisements as candidates flood media outlets in the pursuit of gaining supporters. However, election years can elicit new ways for brands to create recognition–as long as they tread lightly. Brands must be careful that their message doesn’t appear to take sides. They have to be creative enough to incorporate an election theme, but appear unbiased in the process. Some brands are doing just that.

Chrysler is using two actors who played presidential roles, one in a TV series and another in a movie, to promote two of its new vehicles. Hotels.com takes a light approach with its Captain Obvious mascot running for president. The advertising storyline takes the mascot to all 50 states in a series of commercials. Pop-Tarts is heading a Pop the Vote campaign. JetBlue launched its “Reach Across the Aisle” ad, showcasing how compromise can help reach resolutions, using rows of red and blue that represent political parties. These are just a few examples of clever ways brands are capitalizing on the election.

By using a topic that is at the forefront of consumer minds, these brands resonate with consumers. Election years bring tense competition and nonstop messages. Consumers may find it refreshing to address such topics in a lighter tone. Brands that bravely tackle such hot topics could reap the rewards.

Top Five Sports Team Brands

Recognizable and popular brands bring tremendous value to a company. Consumers gravitate to well-known brands because they feel that the products provided by those brands are trustworthy. After all, they wouldn’t be popular if they weren’t, right? At least that is the logic that many consumers have regarding brands. As consumers, we often choose our groceries and fast food items based on the brand name. For instance, if we want a cheeseburger, we know numerous available fast food restaurants that serve cheeseburgers (e.g., McDonald’s, Burger King, Wendy’s, and others). We also know the different taste, size, and cost of those cheeseburgers. We have become familiar with the brands and often base our purchasing choices on the products we know those brands offer.

While recognizable brands often include the food we eat, brands exist for a variety of other purposes. One of those is entertainment in the sports world.

Sports teams rely heavily on their brand in order to entice fans to attend games and purchase memorabilia. Heavily advertised brands are likely to do better than those less advertised. Providing a plethora of memorabilia (such as clothing, cups, key chains, and more) with recognized logos and brand names also helps raise brand value. The more recognizable a brand name, the more a team can charge for tickets and products. Winning teams also raise the bar for brand recognition, which increases the value of the brand.

According to Forbes, the top five most valuable sports team brands in 2015 were as follows:

  1. New York Yankees with a $661 million brand value.
  2. Los Angeles Lakers with a $521 million brand value.
  3. Dallas Cowboys with a $497 million brand value.
  4. New England Patriots with a $465 million brand value.
  5. Real Madrid with a $464 million brand value.

These numbers identify value based on brand, not necessarily the worth of the brand or the team in general. This means that the brand name alone can provide much value in generating revenue and recognition for a team. Therefore, the more visible the brand, the more valuable it becomes. As you can see, the most popular sports team brands range in sport type – baseball, basketball, and football.

 

Budweiser’s Temporary Brand Change: A Gamble or a Smart Strategy?

It’s not often that a company temporarily changes its brand. Changing a brand is a huge gamble. It’s a gamble because consumers typically do not like change, becoming accustomed to the look, products offered, and reputation of particular brands. Therefore, brand changes can cause confusion and concern that a product has changed as well. However, Anheuser-Busch has recently taken that gamble.

In May of this year, one of the biggest brewers in the world has decided to try a new tactic to attract consumers. In an effort to spike lackluster sales, Anheuser-Busch announced its intent to temporarily change the brand of one of its most popular beers, Budweiser. Taking advantage of a political year, patriotic holidays such as Memorial Day and Fourth of July, and the summer Olympics, the company is strategically timing the brand change. The company announced that the temporary change from “Budweiser” to “America” will extend from May to November, when the elections end.

While changing a brand can prove risky, the brewer is banking that consumers will readily recognize the design as Budweiser. Although the words have been changed on the label, the design and colors are decidedly that of Budweiser’s. In fact, at first glance, a consumer would likely associate it with Budweiser. However, confusion may occur when consumers pay closer attention and realize that the name is different. This may lead consumers to question whether it is a knockoff brand from another company or whether the beer itself has changed in taste.

The company hopes that the “America” rebranding effort will appeal to consumers’ patriotism. However, immediately upon its announcement regarding the change, consumers flocked to social media with negative comments, especially given that the company is not based in America. Despite this fact, Budweiser has consistently remained the “All-American” beer, so the idea of rebranding it “America” may not be so far-fetched after all.

Another risk of rebranding typically includes high costs, especially for large corporations. However, Budweiser is one of the biggest advertisers in the America. It spends millions of dollars on advertising each year, spending more than $275 million on Super Bowl ads alone for the past decade. Therefore, it seems its rebranding effort pales into comparison. The company’s rebranding announcement has sparked numerous articles on the Internet, garnering it more publicity with little effort on its part. The more publicity a company receives, the more recognition it gains and the more it remains on the forefront of consumers’ minds. For the actual design of the rebrand, it is likely that the costs are low considering the company is using a recognized label and simply making minor changes, specifically replacing words.

With a continuing decline in sales and increased competition in craft breweries, Budweiser has to try new ways of enticing its customers. According to Forbes, Budweiser ranked #25 among the brands with the highest value in 2015 at $23.4 billion, with sales of $10.9 billion. Therefore, the costs of rebranding will not likely harm the company, making the gamble worth a try, even if it doesn’t generate the returns the company hopes to gain. It will be interesting to see how the change affects sales by the end of November.