Our Experience

Industries Petroleum Natural Gas Chemicals Electronics Pharmaceuticals, Medical Devices, & Biotech Retail/Consumer Goods Technology Transportation Local/State Government School Districts Other Industries

Functional Areas Antitrust & Competition Analysis of Damages Forensic Economics Intangibles/IP Labor Economics Regulatory Economics & Finance Transfer Pricing Taxation Valuation Fiscal Impact Analysis Demographic Analysis Public Policy Analysis

 

Intangibles/Intellectual Property

Innovation & Information Consultants, Inc. specializes in the economic analysis of intellectual property and intangible assets. We are cognizant of the rapid evolution of intellectual property matters and draw upon our experience and knowledge in numerous disciplines to provide reliable analyses for our clients. We apply advanced economic techniques and rigorous analysis in valuing intangible assets and intellectual property, including brand names and trademarks, patents, workforce-in-place, goodwill, manufacturing and technical know-how, customer lists and license agreements.

We have significant experience in valuing intellectual property related to transfer pricing, including the resolution of tax controversies. Our knowledge of operations in markets across many industries allows us to address a myriad of intellectual property challenges that our clients face.

We provide our clients with expert testimony, litigation support, valuation services, and economic damages determination. Our experience includes intellectual property analysis in the consumer finance, oil and gas, chemical, pharmaceutical, computer technology and medical device industries.

Transfer Pricing — Royalty Rates

In recent years, U.S. and international tax authorities have increased the level of attention concerning arm’s-length determination of the licensing and use of various forms of intellectual property. IIC, Inc. consultants have substantial experience in intellectual property matters involving transfer pricing.

Section 482 of the Internal Revenue Code encompasses the U.S. transfer pricing regulations. IIC, Inc. recently completed an economic analysis of the arm’s-length royalty rates for licensed intellectual property from a domestic chemical manufacturer to a foreign subsidiary. Using our extensive knowledge of the Section 482 regulations, we employed several different transfer pricing methodologies including the comparable profit split method, residual profit split method and comparable profits method. We provided the client with an accurate and defensible analytical assessment of the arm’s-length royalty rates for the license of intellectual property.

IIC, Inc. analyzed and determined the appropriate fair market value of trademarks associated with a large multinational company under Section 482. We provided our client with an in-depth report detailing the numerous economic assumptions and valuation techniques underlying our computations. The diverse nature of the intellectual property, spanning several industries, required us to apply several different valuation methodologies to assess the fair market value. We subsequently computed an arm’s-length royalty rate for the license of the trademarks, consistent with the transfer pricing regulations.

Transfer Pricing — Cost Sharing

Cost-sharing agreements (CSAs) have become a popular vehicle for companies to develop and use intellectual property in a tax efficient manner. A CSA represents an agreement between two or more parties to share the costs to develop one or more intangibles in proportion to the reasonably anticipated benefits from the individual exploitation of interests in the intangibles that are developed as provided for under the Section 482 regulations. Multinational companies may use CSAs to transfer valuable intangibles offshore where their ultimate use results in profits earned in low tax jurisdictions. A key component of many CSAs involves the “buy-in” and “buy-out” provisions. A buy-in payment includes the valuation of the contribution of intangibles to a CSA. A buy-out payment reflects the consideration that must be paid under the situation where a withdrawing participant must be compensated for ceding its interests in the jointly developed intangible assets.

IIC, Inc. has extensive experience in assessing the validity and reasonableness of CSAs, including the calculation of the share of reasonably anticipated benefits as well as valuation of buy-ins and buy-outs. In one project, IIC, Inc. examined the intangible value of several software companies purchased by a domestic company with overseas operations. We computed the intangible value implied by these transactions, including a royalty buy-in amount that various offshore entities should be charged for the use of the intangibles. IIC, Inc.’s analysis assisted the client to accomplish a successful settlement and resolution of tax controversy.

Heightened interest in cost sharing agreements by taxing authorities necessitates a careful review of potential buy-in payments for the joint development and license of intellectual property. IIC, Inc. recently completed a project involving the valuation of medical device intellectual property and related cost sharing buy-in payments for tax purposes. In this engagement, we employed the residual income approach to develop a discounted cash flow analysis of future economic benefit derived from the different medical devices. We applied our medical device and intellectual property knowledge and valuation experience to determine a series of fair market values for our client. We subsequently computed the appropriate buy-in payments and provided our client with a clear and concise report detailing our findings. Based on our calculations and reports, the client was able to achieve a suitable resolution prior to litigation.

The diverse nature of intellectual property characteristics precludes the use of one standard valuation methodology. Each case is unique and requires a complete and thorough analysis of the market and specific intellectual property matter. IIC, Inc. has substantial experience in tracking intellectual property issues across numerous industries and the nature of the intellectual property. In one engagement, IIC, Inc. determined arm’s-length buy-in payments for the development and license of a particular product offering of a large pharmaceutical company. Relying on our extensive knowledge of cost-sharing agreements, intellectual property issues and the pharmaceutical industry, we provided our client with a detailed report computing the appropriate buy-in payment amount.

In a separate matter, IIC, Inc. provided valuable insight and expertise in assessing buy-out payments of a large pharmaceutical company CSA. Our principals developed complex analytical models to appropriately value the developed intangibles, including the appropriate buy-out payments for parties withdrawing from the CSA. The project entailed a detailed investigation of proprietary intellectual property relating to specific intangible assets. Using our expertise of the pharmaceutical industry combined with our knowledge of the transfer pricing regulations and CSAs, we were able to provide our client with objective, concrete valuation results using a residual profit analysis. Equipped with our analyses and results, our client was able to negotiate a reasonable settlement prior to litigation.

Intangible Asset Valuation

The valuation of intangible assets requires an attention to detail concerning valuation inputs and assumptions. Recent tax developments, including potential adjustments under Section 367(d) of the Internal Revenue Code have led to a renewed focus on the valuation of intangible assets including workforce-in-place and goodwill and going concern. In a recent project, IIC, Inc. valued the workforce-in-place for a large chemical manufacturing company. We employed sound valuation methodologies to determine the fair market value of the company’s employees. The consulting project included an analysis of the fair market value of the goodwill and going concern, including the appropriate level of foreign and domestic goodwill and going concern inherent in a transfer of business operations. We provided the client with an accurate and defensible economic analysis of the fair market value of the intangible assets.

Valuation of intangible assets can be a complex aspect of determining the value of a corporation. IIC, Inc. valued the intangible assets associated with a large financial services company. We performed an in-depth investigation into the reasonableness of a completed valuation and offered our own alternative analysis and results. In particular, we developed a complex, comprehensive computer model to measure the value of these intangible assets. The model incorporated knowledge and inputs regarding the discounting of future cash flows associated with intangible assets, including risk determination and lifing analyses. The culmination of this project was a detailed and extensive report addressing both the theoretical and quantitative aspects of valuing intangible assets associated with a financial services group. This report formed the basis for successful mediation of the issues where IIC, Inc. participated along with both parties to the dispute.