CLP, LESI Copyright Committee, V3Data, Principal, San Diego, CA, USA
The traditional valuation metrics that apply to physical technology governed by patents do not adequately work for the valuation of software not protected by patents but rather governed by privacy, trade secrecy, and copyright. Only a small portion of commercially available software is covered by patents. Copyright for commercialized software offers weak valuation principles. A recent article in les Nouvelles, discussed that the accounting rules required by FASB do not accurately apply to software valuation. This article will review other traditional valuation methods used to value technology and show that these valuation methods are also inadequate for the business valuation of software. Since the value generating principles such as identification, possession, ownership, and trade secrecy for software can be lost easily by failure to take the appropriate due-diligence measures, some best software valuation practices will be highlighted such as the need for an IP audit to give assurance that the value principles of ownership, possession, trade secrecy and privacy are being maintained.
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