The core methods of the Ministry of Trade, Industry and Energy''s Practical Guide of Technology Valuation are the Technology Factor Method and the Relief from Loyalty Method, most of the detailed contents are from those of Japan. But this guide does not explain the background and why it was introduced.
The purpose of this study is to theoretically classify the IP valuation model and to derive and analyze the characteristics of IP valuation model among USA, Japan and Korea. And It also presents the limitations of the IP valuation model of Japan introduced in this guide. This paper examines the overall trend from the historical background to the present of the USA and Korea’s IP valuation model, including the IP valuation model of Japan introduced in this guide.
This results of this study are as follows.
Theoretically, IP valuation model can be classified into the types of legal, government, judicial precedent and market. The types of legal and government are used in written law countries and are special and differ from markets. The type of judicial precedent is used in an unwritten country. And the type of market is commonly used and follows the universal principle.
The characteristics of IP valuation model among USA, Japan and Korea are summarized in terms of starting point, valuation ecosystem, method type, and relevant departments.
First, The IP valuation of USA began in 1988 and Japan and Korea in 1996.
Second, The IP valuation ecosystem of USA is evolving with markets, governments and legal. But Japan and Korea are led by the government type and are gradually becoming market type.
Third, the types of IP valuation model of USA is identified as market type, government type and judicial precedent type. So the final decision is decided by trial and follows the universal principles. On the other hand, in Japan and Korea, the legal type comes first, followed by government type and followed by market type. Therefore, in final decision, laws and regulations come first, followed by related recommendations, and followed by market. So the IP valuation model of Japan and Korea is different from market.
Fourth, in the tax/financial sector, IP valuation models are influenced by the IRS in USA, and Japan and Korea follow tax/financial laws. In the Intangible assets/IP sector, The USA IP valuation models are also influenced by the IRS, Japan are led by the Intellectual Property and Korea are led by Ministry of Trade, Industry and Energy.
The limitations of the Japan IP valuation models recommended in the Ministry of Trade, Industry and Energy''s Practical Guide of Technology Valuation are as follows.
First, Loyalty method recommended in this guide was suggested by the Japan Patent Office. This method has been pointed out almost simultaneously with its appearance. The Japanese Institute of Certified Public Accountants(2001) points out that there is no basis for a base rate in this method. In addition, if it is a simple trade, three rate beside base rate are not applicable. The complex PatVM(2006) introduced for IP valuation was also recommended by government agencies but is only one of the models used in the market. This model alone should not recommend the valuation of technology or IP.
Second, The technology factor method recommended in this guide is too complicated as PatVM method. The core of the technology factor method is the calculation of technology elements. However, to calculate this technology elements, you need to know industry factor and technology rating(step 1). However, to know technology rating, you need to know the ratio of intangible assets value and the average of technology assets ratio(step 2). In addition, the ratio of intangible assets value is the ratio of the value of intangible assets to aggregate value of listed stock of the company, and technology assets ratio is the ratio of R&D expenses to the sum of R&D expenses, advertising expenses, and education and training expenses(Step 3). And the existing company’s aggregate value of listed stock should be used to assess the value of any technology(Step 4).