Valuation, Monetization, and Disposition in Bankruptcy

AuthorFernando Torres, MSc
ProfessionIPmetrics LLC
C10 09/02/2011 12:56:4 Page 169
Valuation, Monetization, and
Disposition in Bankruptcy
Fernando Torres, MSc
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 inta ngible assets embodied enough goo dwill to
justify what amounts to the $2 million-per-word price paid although, after 40 years
in business, the last of 90 U.S. stores bear ing the brand had close d 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 prod ucts depend on patent protection to esta blish a
degree of niche monopoly to raise prices and recoup extraordinary investment costs,
and patent offices across m any jurisdictions routine ly restore to patent owners th e
term lost to slow approv al processes. Compatib ility across diverse comm unication
devices produced by otherwise competing manufacturers relies on standards and
the pooling of patents embodying them. Media compani es increasingly depend on

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