Why is the “cost” approach for IP valuation deficient?

Minneapolis intellectual property attorney Gary Speier explains how the cost approach for IP valuation is deficient.

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Phone: (612) 359-3261 or (408) 660-2983


Well, most of the time you really can’t form a nexus between the costs that were occurred in acquiring the IP into the value of the underlying IP. So for example, there are a lot of what we would call silly patents out there, patents that people would pick up and they would laugh and they would say, this has no value whatsoever. And the reason is when you get a patent you really need to overcome the burden of it needs to be useful not valuable. So there a lot of patents out there with virtually nill value even though there was a discrete cost that was incurred in obtaining that patent.