TRADEMARK VALUATION

The exercise to value a mark or trademark is part quantitative and part qualitative. The most important data points are:

revenue tied to the mark
royalty rate applied

A formal valuation should at least be considered in these events:

selling or licensing
M&A
litigation (damages)
financial reporting (post-acquisition)

The most common approach involves a Relief-from-Royalty method. A royalty rate (usually 3-10%) is applied to future revenue attributable to the mark. These future cash flows (less costs to maintain the mark? Are discounted to present value.

Since sales data on the price paid for a trademark is difficult, if not impossible, to find, the market approach is almost never applied.

The cost to recreate the mark, such as legal fees, branding and marketing costs and time value of recognition, is another valid valuation method.

Key Factors That Affect Value

Regarding of the method applied, value is based on:

Brand recognition
Revenue tied to the mark
Market share
Geographic coverage (U.S. only vs. global)
Legal strength (registered, enforceable, no disputes)
Industry growth
Customer loyalty