Understanding How Trademarks are Evaluated

Trademarks are used by a wide range of companies in the provision of the legal protection of the organization’s word, name, or design among other things. Despite existing for more than a decade, evaluation of the exact value of a trademark in the market has always been a challenge. The exact value of intangible assets can be evaluated. Below are some of the approaches on how trademarks can be evaluated.

Income Perspective

The analysis of this approach examines the monetary yield of a business and relates it to the value estimated on the trademark. The relationship between the two variables is linear; this means that the return that a business earns determines the value of the trademark. Businesses with high income set the price of their trademark higher, and vice versa. Examination of future performance of the business will help determine the risks that are likely to present themselves in the future, the type of cash flows and the economic benefit derived from the operations, the analysis around the aspects will determine how a trademark should be valued.

Market Approach

This is where a comparison of the mark is done in relation to the marks already existing in the market. The analysis focuses on the transaction costs and the royalty rates to assist ascertain the returns that will accrue on exact intangible assets. With this approach, the analyst focuses just on the market trends as they analyze the transactions that materialize from particular marks that relate to the one being evaluated. As a result, the trademark is valued based on the current market prices of a mark that is similar.

Cost Method

This approach examines the explicit and implicit costs encountered while working on the trademark. Promotion of the company and its brand also comes at a cost and this is also considered in the approach when evaluating the mark. This method borrows some aspects from the market approach by employing the market transactions analysis to determine the cost and time that would be deployed to come up with a similar product. Henceforth, a trademark’s value is determined by how much resources have been invested during the process of inventing it. You can also see Morris Turek-trademark attorney to guide you through the process of trademark evaluation.

Other Approaches

For a company to maximize on their trademark value, some other aspects need to be looked into despite the one listed above. These aspects include but not limited to;

  • The quantitative and qualitative aspects of the mark help determine its value. The bigger and better quality a mark is, the higher it is valued.
  • If a trademark is attached or assigned to a contract, this will also have a direct impact on its value. Unlike other unassigned marks, this will be valued a bit higher.
  • During analysis on the future market performance of a mark, the results should clearly state the position of the mark in the future. Sustainability of the mark in the future market is very critical since it also helps determine how much it should be valued.
  • Apart from securing the future, the current market position a mark holds is very critical and its position should also be clearly stated. If a mark holds a better position on the market, then it only makes sense to have it better valued.
  • The company’s capital structure is a vital element in evaluating a mark. The structure could also be modified in accordance with the company’s needs as they arise. This also has a direct impact on the mark’s value and that is why it is also important to examine it.

In conclusion, evaluating a trademark requires an investigation of various aspects that have an impact on its current and future performance. The analysis will help determine its lifespan in the market, whether its long term or short-term. This will intern assist in valuing it appropriately.

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