Calculator · Intangible assets

Technology and patent value

Value a technology or patent with the relief-from-royalty method: the after-tax royalties its owner saves over its remaining useful life, with a range and a check against the industry margin.

How relief-from-royalty values a technology

Relief-from-royalty values a technology as the royalties its owner avoids by not having to license it from a third party. The royalty rate comes from comparable licences, adjusted for exclusivity, territory, stage of development and the share of the product the technology represents.

The revenue the technology supports fades as newer technology takes over, and stops at the end of its remaining useful life (the earlier of replacement or patent expiry). The royalties saved are taxed and discounted at a rate above the WACC, because a single technology is riskier than the business. Check that the rate leaves the licensee a fair share of the operating margin.

Related: Brand value · MPEEM · Cost approach · Model notes

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