Today, let’s discuss valuing copyrights in an estate by going over an example scenario: You have been named the executor of an estate. While going through this estate, you discover that the person published several books, which are still in print and making money. This creates a problem for you since you have to give an accounting to the kids, which means you have to give everything a dollar value, including the copyrights to these books. So, how do you determine the value of these copyrights?
There are a few different methods for valuing copyrights in an estate, but here are the most common:
- The Cost Method. With this method, you determine the cost of reproducing or replacing the asset. Whatever that number is is the value of the asset. This method works best when the asset hasn’t been put on the market yet or could be re-created quickly. It works well for accounting purposes, but since it doesn’t account for future royalties, it’s not ideal for copyrights.
- The Market Method. With this method, you look at comparable assets recently sold or valued and use that to determine the value of your asset. This is the typical method for real estate transactions – the value of a house is often determined by looking at what similar homes in the area have recently sold for. When the data is available, this is often considered the best method. However, finding that data can be very difficult since it’s hard to find another copyright that’s truly comparable to yours – after all, the whole point is to be creative and unique.
- The Income Method. This is the most widely used method for valuing copyrights. With this method, you (or your qualified expert) determine what the future income stream is likely to be based on historical sales, market trends, and the like. This method works best when you can get reliable market data to support your predictions.
When in doubt, you can hire an IP valuation expert to choose the best method based on the circumstances and how much money the copyrights are likely to bring in. On the other hand, if the copyrights are making little money or haven’t even been published yet, you’re probably better off saving your pennies and making your best guess.
If you’d like to learn more about valuing copyrights in an estate or have questions about dealing with copyrights in an estate, feel free to contact me at kaway@kawaylaw.com.
