CLP CLP Licensing Valuation & Financial Analysis 2

Question 1

What is a milestone payment in a licensing agreement?

Accepted Answer

A payment triggered by achieving a defined development or commercial event

Answer

A milestone payment is a lump sum paid when the licensee reaches a specified event, such as regulatory approval or first commercial sale.

Question 2

The relief-from-royalty method calculates IP value based on:

Accepted Answer

Royalties the owner is relieved from paying by owning the IP outright

Answer

The relief-from-royalty method values IP as the present value of hypothetical royalty payments the owner avoids by owning rather than licensing the asset.

Question 3

Which term describes a royalty base computed on the selling price of only the smallest saleable unit that practices the licensed patent?

Accepted Answer

Smallest saleable patent-practicing unit (SSPPU)

Answer

The SSPPU limits the royalty base to the component that actually embodies the patented feature, avoiding royalties on unrelated product value.

Question 4

A stacking royalty problem occurs when:

Accepted Answer

Multiple licensors each charge royalties on the same product, making cumulative rates uneconomic

Answer

Royalty stacking happens when a product requires licenses from many IP owners, and the combined royalty burden exceeds what is economically viable.

Question 5

What does IRR represent when evaluating a licensing opportunity?

Accepted Answer

The discount rate at which the NPV of deal cash flows equals zero

Answer

IRR (Internal Rate of Return) is the discount rate that makes the NPV of all deal cash flows zero, indicating the deal's effective return rate.

(CLP) Certified Licensing Professional Practice Test

(CLP) Certified Licensing Professional Practice Test

CLP CLP Licensing Valuation & Financial Analysis 2