Abstract
In December 2006, Xiang Dong Yu, an engineer hired at the Chinese branch of Ford Motor Co., stole 4000 proprietary documents from the company before tendering his resignation and leaving to work for a competitor. The value of the secrets contained in those papers was calculated at $50 million. Yu was sentenced to 70 months in federal prison and ordered to pay a fine of $12,500 after pleading guilty to two counts of theft of trade secrets (U.S. v. Yu, U.S. District Court, Eastern District of Michigan, No. 09-cr-20304).
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Notes
- 1.
According to Knight (1921) risk applies to situations where we do not know the outcome of a given situation, but can accurately measure the odds. Uncertainty, on the other hand, applies to situations where we cannot know all the information we need to set accurate odds in the first place.
- 2.
See Sect. 7.4 below.
- 3.
Section 1.4 above.
- 4.
These are the most conventional valuation methods; yet, valuing intellectual assets may be harder than it looks. Anson (2015) gives us a list of 25 alternative methods. Some commentators identify almost 30 different methods of value assessment – a fact that highlights the level of methodological imprecision surrounding this area. Let us highlight a few of these. For instance, the “Brand Contribution” measures the contribution of the brand, as opposed to other elements of the business profit. The “Replacement Cost” calculates how much money we need to develop a substitute for the IP with the same functionality. The “Reproduction Cost” measures the aggregate costs necessary to produce an exact duplicate. The “Technology Factor” measures a technology’s contribution to a business’ total revenue; it calculates a net present value and then is multiplied by an associated risk factor (the “technology factor”). The “Venture Capital Method” analyzes the value of future cash flows over an asset’s life. It employs a fixed, non-market-based discount rate (generally, a rate of between 40 and 60%), and it makes no adjustments to account for the probability of success (e.g., a patent’s success). Finally, the “Liquidation Value Method” measures the liquidation value for any piece of IP, which is the lowest price that the asset is virtually guaranteed to obtain in a distressed situation.
- 5.
Sometimes, though, there are still valuation methods that entrepreneurs can apply. In April 2015, Kolon Industries Inc. paid $275 million in restitution to Dupont Co. to settle the litigation involving the theft of their trade secrets relating to Kevlar bulletproof vests.
- 6.
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De Leon, I., Fernandez Donoso, J. (2017). The Impact of IP Risk in the Development of IP Markets. In: Innovation, Startups and Intellectual Property Management. Springer, Cham. https://doi.org/10.1007/978-3-319-54906-4_6
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