A topic of interest to many of our customers is intellectual property valuation. IP professionals intuitively understand that IP has monetary value and use a number of ways to approximate it, but there is no standardized method for assigning a value to IP. A number of models exist that are useful to internally assess IP that can help professionals make reasonable decisions in disciplines such as licensing and mergers and acquisitions. Externally, though, these methods don't conform to Generally Accepted Accounting Principles (GAAP).

They don't contain a way of dealing with critical accounting practices such as the principle of prudence or the concept of depreciation. Without a way to address these principles on a ledger, the valuations can't assure reliability and accuracy to other businesses in an accepted way.

In my view, the industry could benefit from a universally accepted set of methods for accurately assessing intellectual property patents because it's a fundamental necessity to fully integrate your IP into your business. While a reliable model does not exist today, I'm confident that a GAAP conformant method will emerge within the next decade.

Looking forward, what would be the tangible benefit of having such a method in place? The answer is the same benefits we currently think of today for having standard accounting practices—those having to do with regulation, risk and P&L.

For example, today you can demonstrate an accepted value for a company you intend to acquire. That value is based on things like existing tangible assets, forecasted revenues and costs. The value is accepted because the ledger that tracks those aspects of the business does so in accordance with accepted practices.

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