Options
Valuation of Patents in Integrated Circuit Industry by Using Real Option Approach–Case of Novatek Mergering Cheertek
Date Issued
2008
Date
2008
Author(s)
Yen, Wei-Te
Abstract
In an era of knowledge economy, high-tech firms pay much attention on management of patents to keep competitiveness. The high-tech firms not only prevent competitors from illegal duplication and infringement, but also obtain royalties without any cost by licensing their owned patents to others. On the other hand, the firms can purchase patents from IP providers to reduce their research and development risk, and to speed the time to market. As a result, patent valuation increasingly becomes a critical task for enterprises. However, in contrast to conventional real assets, patents lack a standard patent/technology valuation mechanism. As a result, the prices of patents should be determined via complicated negotiation processes between the IP provider and IP user. Option based valuation approaches are proposed as a useful framework in which to consider management of a company''s patent portfolio, and the difficulties of a rigorous application of the method form a fruitful field for future research. This paper employs both real options approach and traditional discount cash flow (DCF) method to evaluate the patents of an integrated circuit design company in Taiwan. The value of the patents using the real option approach is more accurate than that using DCF method due in part to consideration of time value and flexibility value.
Subjects
Patent,Real Options
Business Valuation
Mergers and Acquisitions
Integrated Circuit
Type
thesis
File(s)
No Thumbnail Available
Name
ntu-97-R95724069-1.pdf
Size
23.32 KB
Format
Adobe PDF
Checksum
(MD5):128e6a8259dda1aa788857ac4960edee