When quantifying damages in breach of contract matters, forensic accountants testifying as expert witnesses must follow professional guidelines and standards applicable to the particular legal jurisdiction. The American Institute of Certified Public Accountants (AICPA) sets forth professional standards and guidelines for certified public accountants (CPAs) when providing expert witness services in dispute advisory matters. Expert testimony can be excluded in federal court through a Daubert motion if, for example, opinions are too speculative, opinions are based on unreliable facts or assumpti ..read more

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Intellectual property (IP) is often the most valuable asset a business owns, but determining the value of IP has many challenges. CPAs Shawn Fox and David Wharton of Fox Forensic Accounting shared their expertise and the hurdles they’ve crossed during a free continuing education webinar, Key Considerations in Valuing Intellectual Property, presented December 1. “IP valuation has so much subjectivity,” Fox said. “It's really a combination of art and science because of all the analysis that has to be performed along with a number of assumptions that must be made.” While IP valuation is somewhat ..read more

Before a valuation analyst can quantify a value of a type of intellectual property (“IP”), they need to select the proper standard of value and premise of value for their engagement. The three standards of value are Fair Market Value, Fair Value and Investment Value. The premises of value are Going Concern and Liquidation. If a company has several different types of IP, some could be valued on a Fair Market Value standard on a Going Concern basis, for example, while other types of IP owned by the subject company could be valued on a Liquidation basis. Here is a glossary of these key terms, wi ..read more

When a property owner is looking to sell a house, real estate agents and appraisers can look at reported sales prices of similar homes in the relevant geographic area to calculate a market value. But quantifying the fair market value of intellectual property (IP), such as patents, trademarks, trade secrets, and copyrights, is much more complex than quantifying the fair market value of a home. Because pricing and royalty data from sufficiently comparable IP sale and licensing transactions from third parties are quite rare and usually subject to confidentiality agreements and court protective o ..read more

There are many reasons a company may need to know the value of its intellectual property, but not all IP can be easily valued. Intellectual Property takes many forms: patented & unpatented technology; inventions, designs, processes and plant varieties; brands, trademarks and trade dress; copyrights and content; trade secrets; software; customer lists and customer relationships; goodwill; in-process research and development; and other forms of confidential information. Additionally, there are certain requirements to complete an IP valuation. CPAs and valuation experts Shawn Fox and David W ..read more

Fox Forensic Accounting principal Shawn Fox shared his expertise on conducting royalty audits in an article published on IPWatchdog. The article, titled Are Your IP License Agreements Undervalued? What to Consider Before Starting a Forensic Royalty Audit, explains the common reasons for royalty underpayments, the costs and benefits of starting a royalty audit, and best practices for drafting an IP licensing agreement. You can read the entire article here: IPWatchdog Publication ..read more

When deciding whether to conduct a royalty audit, it’s important for intellectual property holders to understand the common reasons for licensing agreement underpayments. While fraud may be an obvious assumption when licensors feel their royalty agreements haven’t been followed, there are other reasons. This topic and others were covered in a free Fox Forensic Accounting continuing education webinar, Determining the Need for a Forensic Royalty Audit, presented in September by FFA’s Shawn Fox, Bruce Bush and Todd Sigler. Fox shared a 20-year empirical study on royalty errors prepared by Invote ..read more

Over time, intellectual property licensors may believe the royalties paid to them are either incorrect or undervalued. And with good reason. According to a 20-year empirical study prepared by InvotexIP Audit Statistics from 1997-2016, approximately 86% of licensees underreported and underpaid royalties owed to licensors. And of those 86%, approximately 46% underreported and underpaid royalties by more than 10%. But before undertaking a royalty audit to claw back underpayments, IP licensors should consider the costs and benefits. This topic and others were covered in a free Fox Forensic Accoun ..read more