Specific Risk-Adjustment Rate Rubric for Intellectual Property Valuation

       SPECIFIC RISK-ADJUSTMENT RATE RUBRIC FOR INTELLECTUAL PROPERTY VALUATION BASED ON TECHNOLOGY READINESS LEVEL

Prof. Madya Dr. Rohaya Abdul Jalil

(Project Leader)

Prof. Sr Dr. Maimunah Sapri

Sr Dr. Mohd Nadzri Bin Jaafar

Ts. Dr Azlin Jamil

Ts. Ng Wee Fern

Sr Nadila Binti Hamidi

Dr Shahabudin Abdullah

ABSTRACT

Intellectual property (IP) valuation is recognized as one of the knowledge that valuers need to explore as a new opportunity in diversifying valuation services. However, IP's intangible nature, unfamiliarity with specific risk allocations, unique IP characteristics and future uncertainty of IP growth make it challenging to allocate specific risks to ensure valuation reflects true economic fair value as IP risks differ. by IP category and technology readiness level (TRL) level. Therefore, through relief from royalty method, the study of the specific riskadjustment rate (SRAR) framework to build a rubric that facilitates appraisers. Four research objectives were formed, namely (i) to examine the element of potential and risk associated with the classification of IP; (ii) to establish the rubric for TRL according to the classification of IP; (iii) to measure the relationship between the TRL and the elements of potential and risk associated according to the classification of IP; and (iv) to propose a framework of a SRAR rubric according to TRL. The problem of establishing the SRAR rubric is achieved through research methodology using content analysis, qualitative data analysis, single-Anova analysis, and narrative thematic analysis. Research procedure 1 successfully assesses associated risks by mapping methodology towards (i) the assessment of the potential risk associated with the classification of IP and (ii) risk assessment according to the TRL level. The SRAR rubric was successfully developed in research procedure 2. In research procedure 3, the SRAR rubric was used in case studies for hypothetical estimation of IP valuation to determine the difference between the variance and the actual estimation. Next, in procedure 4, the study validated the use of the SRAR Rubric and the differences in variance that can be used from the professional opinion of focus group discussion experts. The study proves the validity of the framework of the SRAR rubric according to TRL with the indication of variance difference for IP valuation at the lower bound range is 5% < x < 10%, while IP valuation at the upper bound range is 5% and less accepted. Introducing this SRAR rubric will familiarize valuing IP among member firms and allow valuers to diversify their valuation service. IP is evaluated as a future backup collateral value for corporate financing.

Keywords:

Intellectual Properties (IP) Valuation, Specific Risk-adjustment Rate (SRAR), Risk, Commercialization Potential, Technology Readiness Level (TRL)