The Copyright of this article rests with the writer Mr. Vinod Khurana, President IFAIA
In the recent past valuation of intangible assets related to intellectual property particularly a brand has gained a considerable importance. Valuation of individual intangible assets is a recent concept in India, though the generic intangible assets better known, as Goodwill has been valued for a very long time. The Goodwill was valued when ever a business as a whole was transferred from one entity to another or when new partners were brought in or old partners left the business to give them there dues as part of their contribution to the business. The recent concept of valuation of Intangible assets related to Intellectual property like Patents, Copy rights, Design, Trademarks, Brands etc, is getting greater importance as these intellectual properties of the business is now often sold and purchased in the market by itself, like any other tangible asset.
Coming to brand valuation, we would say that creating a power brand involves blending of resources in a unique way. The resources spent on brand building are not consumed and have a lagging effect, which ultimately turns out in formidable asset formation, over a period of time. Building of brands takes years; most of the famous brands are even 100 years old. What we need to understand is that the value of the brands needs to be maintained continuously and is not some thing that is consistent or permanent, they do change with the changing environments. What matters in business is to maximize the economic wealth, therefore if the establishment cannot maintain brand or the importance of the brand has higher commercial value in the hands of other organization, one may just like to exchange hands or shake hands as it benefits both the parties and makes economic sense .In order to optimize the gains it becomes necessary to know the intrinsic value of brand from time to time .I illustrate this with a simple example, say a reputed Indian brand motorcycle is selling for Rs.40000/ which has a basic cost of Rs.30000 + 30% taxes i.e.Rs.9000 + Rs.1000 profit, is facing a competition from import and imported compatible motorcycle in all respect is also selling for Rs.40000/, which has a basic cost of Rs.25000 + tariff and other taxes 60% i.e.Rs.15000 and with nil profit. Presently Indian manufacturer is not facing any serious threat due to its brand equity, though the market price is same. As we know that by the year 2004 the scenario is going to change considerably and the taxes on the import would be compatible with the taxes on the indigenous related product. So say in this case the revised cost of sale of imported motorcycle will be Rs. 32500/ i.e. Basic cost as it is of Rs.25000/ and revised taxes 30% i.e.RS.7500/ against the indigenous motorcycle cost of sale of Rs.39000/. In these circumstances what does the indigenous manufacturer do? Will he be able to compete with the imported motorcycle? And if he is not able to compete then what happens to his brand? Which he has built over many years and which presently can be sold for substantial economic consideration. The Indian corporate with substantial brand value of there product may face such situations in time to come, there fore he needs to address himself and formulate a strategy and to do that the knowledge of brand value is of great importance.Many legal issues arise while doing commerce on Internet which needs to be understood e.g. how far the web contents is protected by copyright law, how effective are the copyright in the present scenario when they become accessible globally, how the privacy and security can be maintained, what Constitutes defamation on the Internet, as the electronic commerce has no geographical boundary. We must be clear as to the repercussion and possibility of defending a lawsuit, in any country where end user resides.
The Brand can be one of the four forms, they are: