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July 27, 2015

Profit split and trademarks after Uniloc

A profit-split analysis for a trademark or other intangible assets attempts to quantify what share of the profit of a business is attributable to the subject asset.

For decades, the usual approach was to use a flat 25% of profit for any kind of intangible assets, known as the “25% rule of thumb“. Since the Uniloc decision, courts have increasingly rejected such general approach and required “to tie a reasonable royalty base to the facts of the case at issue“. The valuation profession is working on approaches how to improve the profit split method.

The attached article – authored by Christof Binder and Anke Nestler and published in Valuation Strategies Jul/Aug 2015 – discusses a new approach of using purchase accounting data published in financial statements to approximate both asset-specific and case-specific profit split data with a particular focus on trademarks and brands.

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