Determine the Value of Your Trademark

HOW DO YOU DETERMINE THE VALUE OF YOUR TRADEMARK?

In general, the value of a trademark is based directly on the trademark’s earning power. Where little or no income history is available, however, imagination, common sense and experience may be the best guides to apply in ascertaining a trademark’s value. In addition, studies of the industry in which the trademark will be used or the products marketed, market surveys of probable sale prices and expected profits, and opinions of industry experts may also be applied.

The value of a trademark lies in the goodwill associated with that trademark. Goodwill is an intangible asset that provides added value to the trademark owner’s worth (such as a recognizable brand). However, in many cases it can be quite difficult to ascertain the goodwill and then place a true value on it at a point in time, because of the many variables that must be considered. For example, reasonable people can differ on future expectations, such as opportunities for increasing the value of the trademark and competitive threats and marketplace risks to the trademark.

Some of the most common approaches to/methods of valuing a trademark are: (1) the income approach, which assigns a value to a trademark based on past and expected future profits associated with the mark; 

(2) the market approach, which assigns a value based on comparisons of transactions (such as royalty rates) involving similar assets; 

(3) the cost approach, which assigns a value based on the cost of creating a trademark and the cost of replacing the existing trademark with a trademark with the same market power; and 

(4) the relief from royalty method, which estimates the expected royalty savings attributable to the ownership of the trademark. Other approaches to valuing trademarks are also used, depending on the nature of the transaction and the reason for the valuation. Licensed valuation firms can assist with valuation of trademarks by attributing a monetary value to a trademark.