Assessment of licence agreement

Organising a new engineering procedure, new materials production, new ideas and ways of thinking becomes more and more important with the development of civilisation. Nowadays income and activity of any enterprise depend foremost on intangible assets. That is why safe protection and appropriate intellectual rights assessment are a secure base of commercial relations. Large established corporations dealing with innovation development have a rather predictable product market. Their income flow is equal in time. That means there is a strong reason for them to use the method of income approach capitalisation. But what about smaller companies whose activity is only about innovative product development, while the creation of this product itself leads to a new type of market? It is particularly difficult to assess their produce using the income approach. This article studies assessment methods applied to one of these cases. We are going to assess alicence agreement, which belongs to one of Tomsk enterprises and is meant for an Indian company. The company is small enough to predict its income flow, so we used money flow discounting income approach to assess its licenses. Within this method we used two options:1..Royalty summation method2.Method of measuring the loss of profit.In case of the royalty summation method, the production according to the license is supposed to take place in the country of the licensee. Therefore, the license income flow is going to be different from the one in the country of the licensor. Royalty summation method considers the assessment of license cost as the sum of royalties. In case of method of measuring the loss of profit, a licensor presumably produces and sells the product at the licensee market according to the cost and prime cost established there. Therefore, the investment license price at this approach is the sum of profit losses, which could be avoided by a licensor if he didn't refuse his target market share in favour of the licensee and had the profit of enterprise according to the agreement. Being successfully applied these methods resulted appropriate investment value assessment of Tomsk company's licence agreement. At present we are carrying out the commercial side of the deals involving it and approbation of its cost at Indian market.

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