Korea Technology Finance Corporation

Technology Appraisal

Technology Valuation

Technology Valuation

What is technology valuation? View

Valuation refers to a method and procedure by which the monetary value of intangible assets or intellectual property(IP) such as patent or copyright is calculated. Calculation of the economic benefits that a certain IP can generate in the market is the main object of the valuation. It is important, among other things, to determine the fair market value of the IP under an arm's length transaction.

Valuation Approaches

In practice, there are three generally-accepted approaches to valuation: Cost Approach, Market Approach, and Income Approach.

Cost Approach is based upon the concept of replacement cost as an indicator of value and the notion that an investor would pay no more for an asset than what it would cost to replace the asset with one of equal utility.

Market Approach attempts to value an IP by examining observable market values for similar assets.

Income Approach attempts to value an IP by estimating the present value of the future economic benefit it is expected to produce.

In general, cost approach is not widely used because it does not reflect the future economic value of the valued IP. The market approach also has limitation since it is difficult to find a comparable IP transaction in the market. Thus, the income approach is generally employed when undertaking the IP valuation. KOTEC has also chosen to apply the income approach in its technology valuation practice.

Valuation Services Available View

KOTEC provides various valuation services in relation to the cases where monetary value of IP rights must be presented as an important precondition for the IP transaction. As an accredited technology evaluation agency in Korea, KOTEC is responsible for delivering the valuation services in compliance with related laws as follows.

Valuation for the IP rights transferred to Venture Businesses through an investments in kind

To be determined: Monetary value of the IP rights

Related law: Act on Special Measures for the Promotion of Venture Businesses (Article 6)

Valuation for the IP rights transferred by a foreigner through an investment in kind

To be determined: Monetary value of the IP rights

Related law: Foreign Investment Promotion Act(Article 30)

Valuation for the IP rights to be transacted in relation to technology transfer

To be determined: Monetary value of the IP rights

Related Law : Technology Transfer and Commercialization Promotion Act(Article 8)
                  Industrial Technology Innovation Promotion Act(Article 38)

Valuation for the inventions to be commercialized

To be determined: Value of new inventions

Purpose: To provide government's financing support program for the prominent new inventions

Related Law: Invention Promotion Act(Article 21)

Valuation for the IP rights to be used as collateral against loans

To be determined: Collateral value of IP rights

Purpose: To facilitate the use of IP as a form of collateral

Valuation for various financing programs of KOTEC

To be determined: monetary value of IP rights

Purposes: For an efficient delivery of various financing programs such as guarantee programs based on IP