Valuation, Monetization, and Disposition in Bankruptcy

• Author: Fernando Torres, MSc
• Profession: IPmetrics LLC
• Pages: 169-181

C1009/02/201112:56:4Page 169

CHAPTER 10

Valuation, Monetization, and

Disposition in Bankruptcy

Fernando Torres, MSc

IPmetrics

1

LLC

After lengthy and intense negotiations, the bankruptcy auction proceedings drew

to a close around 3 o’clock in the morning. The representatives of the winning

bidder were satisfied that they had acquired a valuable asset for close to $4 million.

Their hard-fought purchase consisted of intangible rights to two simple words, sup-

ported by trademark registrations, a handful of contracts, and the associated domain

name and e-commerce site. These intangible assets embodied enough goodwill to

justify what amounts to the $2 million-per-word price paid although, after40 years

in business, the lastof 90 U.S. stores bearing the brand had closed months before

and the entire inventory had been liquidated.

The ‘‘Tower Records’’ intellectual property (IP) was thus the last asset converted

into cash to satisfy the claims of a multitude of creditors, but those two words were

the foundation upon which an electronic retail business would, in a matter of weeks,

continue to generate value for the new, overseas-based, owners.

IP and the Bankruptcy Context

The notion that intangible assets (IAs) and IP in particular are an increasing propor-

tion of total corporate assets is relatively undisputed by now. Industries such as phar-

maceuticals, communications, and media are the clearest examples of this

phenomenon. Pharmaceutical products depend on patent protection to establish a

degree of niche monopoly to raise prices and recoup extraordinary investment costs,

and patent offices across many jurisdictions routinely restore to patent owners the

term lost to slow approval processes. Compatibility across diverse communication

devices produced by otherwise competing manufacturers relies on standards and

the pooling of patents embodying them. Media companies increasingly depend on

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