There are many cases in which the interest in an economic valuation of a brand may arise. Among these, many cases of contractual and economic situations involving this distinctive sign, such as trademark assignment or license agreements or corporate transactions such as a merger or acquisition, if one or both involved companies are trademark owners.
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The need to determine the economic value of a brand can arise even in the presence of a dispute, such as when there is a claim for damage in the course of a lawsuit for infringement and, therefore, it is necessary to quantify the economic value of a mark in order to be able to quantify the damage.
Which factors affect the evaluation
Many factors are important in the economic valuation of a brand, among which:
- The costs incurred in the registration;
- The costs for maintenance and defense of the mark;
- “seniority”, namely “the age” of the brand;
- The degree of knowledge of the same in the public and advertising expenses made by its holder;
- The market shared by the mark and consumers’loyalty
Method of economic evaluation: royalties
There are many methods of economic evaluation of the brand: among the most frequent, we can include the “royalty rate method” and the method of “royalty relief”.
Royalty rate method
Those who follow the method of royalty rate believe that the economic value of the brand corresponds to the royalties that would be obtained by licensing the brand. The royalty rate is identified by comparison with homogenous market transactions.
Method of “royalty relief”
According to the system of “royalty relief”, the brand value would correspond to the total amount of royalties that – in a given period of time – the trademark owner would be forced to pay to a third party if was not the owner but had only the right to use the mark.
For more information, please, contact Eva Troiani’s law firm.