CLP CLP Licensing Valuation & Financial Analysis 3

Question 1

Which approach to IP valuation is most appropriate when the IP has no comparable market transactions and generates no direct revenue yet?

Accepted Answer

Cost approach

Answer

Income approach

Answer

Market comparable approach

Answer

Relief-from-royalty method

Question 2

A royalty rate expressed as a percentage of net sales is reduced by a 'royalty stack deduction.' What is this deduction for?

Accepted Answer

To account for royalties owed to third-party IP holders whose rights are also used in the product

Answer

To reduce the rate when sales exceed a volume threshold

Answer

To offset upfront fees already paid to the licensor

Answer

To adjust for currency exchange fluctuations

Question 3

What financial document would a licensor primarily review to verify reported royalties are accurate?

Accepted Answer

Licensee's royalty statement and supporting sales records

Answer

Licensor's own income statement

Answer

Patent prosecution file history

Answer

Product liability insurance certificate

Question 4

In discounted cash flow (DCF) analysis for a license deal, a higher discount rate will:

Accepted Answer

Reduce the present value of future royalty streams

Answer

Increase the present value of future royalty streams

Answer

Have no effect on present value

Answer

Apply only to milestone payments, not running royalties

Question 5

What is a sublicense fee, and how does it differ from a running royalty?

Accepted Answer

A fee paid by the licensee to the licensor when granting sublicenses, separate from product-based royalties

Answer

A per-unit royalty paid directly by sub-licensees to the original licensor

Answer

An upfront payment made when the primary license is first signed

Answer

A penalty charged when the licensee violates sublicensing restrictions

Question 6

Which Georgia-Pacific factor specifically addresses the anticipated profit the licensee will realize from using the patented invention?

Accepted Answer

Factor 13 — the portion of realizable profit that should be credited to the invention

Answer

Factor 1 — existing royalties for the patent

Answer

Factor 6 — the duration and terms of the license

Answer

Factor 15 — the hypothetical negotiation outcome