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.