Forensic Analysis of Intellectual Property Infringement

Forensic Analysis of Intellectual Property Infringement

[This piece has been authored by Rahul Sethia, a student at the National Law Institute University, Bhopal.]


The fundamental reason for the existence of Intellectual property rights is the need to protect intangible ideas- which foster innovation, competition and harbor the spirit of inventors and creators. The power of intellectual property is such that it has the capacity to offer protection against assets that are invisible and imperceptible- but offer economic value that is difficult to overstate, functioning as a reward mechanism for future inventions. And so, for evident reasons- the task to calculate damage, gravity of the violation- or even trace/detect a violation of different kinds of Intellectual Property is an extremely complicated task- even with the advent of technology of Big Data. Additionally, forensic evaluation is also important in cases involving bankruptcy, tax fraud, administrative misconduct and etc. Possession of a distinguished and diverse IP portfolio is critical for acquisition, market dominance, and general profitability. This makes their protection from infringement even more important.

Calculation of infringement of intellectual property, given its complex state of existence- is intrinsically dependent on the substantial flexibility of valuation procedures. To determine infringement, let alone calculate damages- valuation of the property concerned along with significant other factors such as type of property, future/current utility etc. has to be taken into account. So, forensic analysis is another subject under the umbrella of valuation, yet it is particularly more complex. Valuation of Intellectual property is a separate project, undertaken for different objectives. These methods or objectives are categorized into 3 different valuations, namely- Transaction, Notation and Controversy valuations.[1] Presently, there does not exist a widely accepted framework or methodology for determining a forensic valuation of intellectual property subjects.[2]

The plaintiff, who is seeking damages against infringement has three sorts of remedies available, broadly speaking.

A transaction valuation is prepared to persuade or convince an agreement which is against or dependent on intellectual property. It is to estimate different variables of the property in question, and a transaction will be concluded on the basis of this valuation. A notational valuation is a compliance obligation, required by law for purposes such as maintaining the accounts of the company- or to track whether the resultant transaction of the property has made a profit or a loss. This is mainly done to keep a record of the valuation, as any property in question of a notational transaction would’ve already concluded. Different types of valuations are conducted for different purposes; hence the consideration vary and fluctuate. A forensic valuation, does not involve any sort of a pending agreement or a transaction, but involves a dispute at hand the subject of which is Intellectual property of some kind. A forensic valuation is where damages are sought against loss caused by infringement by a party. This is also called a controversy valuation.  

Many of the world’s biggest and most prominent corporations identify intellectual capital as their most valuable asset, since it is the foundation of their market domination and continuous profitability. In affluent nations, the holding of intellectual capital is often a primary objective of mergers and acquisitions[3]. Nonetheless, the valuation of intellectual property (IP) items is as crucial for developing nations[4]. Several essential recommendations for appraising different forms of intellectual property have been published, but they do not adequately represent the methodologies of forensic investigation.

Expert forensic valuation of intellectual property objects may be crucial in civil law disputes, investigations and litigation of criminal cases involving infringement of copyright and associated rights, criminal bankruptcies, tax crimes, and administrative offences (violations of copyright and related rights, invention and patent rights).

This article seeks to prove the viability of using current techniques for analyzing intellectual property objects as the foundation for establishing forensic expert methodologies for criminal, civil, and arbitration processes.

Multidisciplinary issues

Intellectual property rights consist of exclusive property and non-property rights to IP.

Increasingly, the outcomes of intellectual endeavor are functioning as a commodity. In many industrialized nations, the proportion of the cost of intellectual goods exceeds the book value of physical assets by three to four times[5]. Determining the value of intellectual goods (whether in the form of the IP objects themselves or the rights to use them) is the most pressing issue facing the emerging IP market in developing nations like India.

A commodity consists of intellectual activity results and a license. From an economic and legal perspective, the existence of a material carrier is sufficient to classify this whole as a commodity. A product incorporating intellectual property is one that utilizes the output of an intellectual endeavor that has obtained legal protection. A service that utilizes the results of an intellectual activity that has been granted legal protection is referred to as a service based on intellectual property.

The creation of such items must be authorized by a license (absolute, full or exclusive).

The sale and purchase of such products and services must be accompanied by a (personal or one-time) license.

In 2011, the international standard for the valuation of intangible assets was approved (its latest version was adopted in 2017) one, and in 2015, the Federal Valuation Standard No. 11 “Valuation of Intangible Assets and Intellectual Property” was adopted.  Over the last decades, a particular application-based approach has evolved.

Aspects of forensics pertaining to the valuation of intellectual property items

Despite the critical nature of assessing the value of IP objects in domestic legal procedures, the practice of appointing and conducting relevant forensic tests is still in its infancy, and the related field of forensic activity is in the process of forming. In the scientific and methodological literature, the concerns of forensic expert assessment of the value of IP objects and other aspects of the study of these items are inadequately addressed.

There is an urgent need to create distinct private forensic investigation methodologies for each of the four forms of intellectual property listed below:

– industrial intellectual property properties: patents for inventions, for lecture achievements, for industrial samples, certificates for trademarks and service marks; – objects of copyright and related rights: works of science, literature, music, painting and graphics, design; – computer programs, databases, and micro topology; – information representing trade secrets and know-how: knowledge of a technical, financial, or administrative and managerial nature, outcomes of research and operational circumstances of interactions with them, for development work, are not covered by patents for design, engineering, or technical documentation.

In many nations, trademarks, brands, patents, licenses, products of innovative work, know-how, and royalty rates are the most typical objects of value assessment.

Less often, one is tasked with determining the price of utility models or industrial designs. Only nations with a strong history of intellectual property rights evolution have sufficient expertise in calculating the value of these objects. Concurrently, new sorts of intellectual property (IP) items are appearing in the world, particularly in the fields of new digital technologies, sports, design, etc.[6]

Existing methods for assessing the value of intellectual property

When establishing the market worth of IP objects, there are many distinguishing characteristics that set them apart from other physical assets. In this circumstance, the idea of “market value” is not necessarily appropriate. If there is no buyer for an IP item, then its present market worth is zero, regardless of the cost of its production. There is no value if there is no demand. The market value is objective, independent of the wants of individual market players, and reflective of the market’s actual economic realities[7]. Due to the fact that the IP object is unique, demand and position are restricted, and the price cannot be compared to anything else. One strategy would be to examine the functional intellectual product, estimate the profit from its practical application, and calculate the conditional market value of intellectual property, which may then be changed. It seems that, for the purposes of legal procedures, the phrase “conditional market value” should not be used while performing a forensic investigation of IP objects, since it does not conform to the legal norm of certainty. If there is credible information on the pricing of comparable IP objects, as well as knowledge on how to determine the market worth of such an item, a comparison-solid strategy may be used.

The most pressing issue is estimating the investment cost of IP objects. It is not required to consider the likelihood of expropriation on the open market when calculating the investment value of a company.

It is efficient to apply the cost technique when estimating the worth of items made by the right holders themselves, or when there are insufficient data to compare the value and income approaches.

Obsolescence and loss of value are also relatively unpredictable and hinder the valuation of intellectual property items. The core of the cost method is to determine how much it will cost to repair or replace an asset, taking into consideration its degree of deterioration. Most often, the cost method is used to software acquired from a third party and software produced in-house, utilized internally, and not for sale. The cost method often involves the computation of expenditures (costs) associated with the development of an intellectual output.

The most important factor in establishing the value of intangible assets and intellectual property is profitability. The 2017 version of the International Standard for Valuation of Intangible Assets incorporated new revenue approach techniques, including the greenfield method (green box method) and distributor method.

The standard includes the following evaluation criteria using the income method:

  1. Technology; client-related intangible assets (contracts, contractual relationships);
  2. Trade names, trademarks, brands; activity licenses (franchising agreements, gaming licenses, broadcast spectrum);
  3. Agreements on competitive restraint. Competitiveness of the object; economic efficiency of the use of the object, including expected receipt of license payments for this result of intellectual activity;
  4. Scope and reliability of the legal protection of the object, including patent purity of the object, degree of novelty of the object;
  5. Technical significance of the object, volume of transferred technical and technological information (production preparation of expert approaches for their solution).

Factors for reducing the cost of IP objects:

  1. Risks associated with low reliability of the initial technical and economic indicators; errors in predicting the efficiency indicators of the use of the assessed object; low reliability of the legal protection of this object; the need for additional research and significant investment;
  2. low technical significance; a high rate of obsolescence for an intellectual product; the costs of organizing the use of an IP objects.

When undertaking a forensic expert evaluation of the worth of IP objects, these variables should also be taken into account. According to the fair statement, the typical method for estimating the cost of IP objects consists of three steps. A first evaluation of the object should be conducted based on the expenses of the resources required to carry out work on the production of the IP object. At the second step, the cost is determined based on economic and mathematical modelling of the evaluation of the efficacy of the IP object’s usage in the manufacture of goods or the rendering of services. The cost of the IP object is eventually justified in the third stage.[8]

It should be emphasized that the challenge of assessing the value of IP objects becomes particularly significant in the context of the creation and growth of the digital economy, which necessitates a new approach to the production and circulation of goods, services, and finances. Towards this end, the European IP Forum in November 2019 (Munich, Germany) featured a comprehensive discussion of the challenges surrounding the valuation of IP assets in the realm of digital technologies. The experience of estimating the cost of products of intellectual activity in the area of digital technologies is accessible in nations where they have been actively created and implemented for an extended period of time, and where they are also commercially disseminated.[9]


For the successful and sustainable growth of the economy and the preservation of domestic enterprise, the development of accurate forensic competence is vital. There is a need for improved techniques for evaluating the value of intellectual property, since the quality of appraisers’ reports remains poor and such evaluations may not always suit owners in contested scenarios that emerge during legal processes. These methodologies should be refined within the context of a forensic analysis of IP objects, taking into consideration the complexity of the investigation. In this regard, it is prudent to realize the possibility of intellectual property to develop forensic examinations of IP objects in forensic institutions.

Simultaneously, it is required to establish a unique calculating procedure for each single item, which will enable consideration of all price aspects that have the greatest impact on its market worth. This technique should include the historical expenses of purchasing or making an item, market circumstances, and might be based on a business’s or individual’s capabilities and actual income. In establishing the value of IP objects, it is also vital to make optimum use of foreign expertise and international norms.


[1] Robert F. Reilly, ‘Forensic Analysis Insights’ (2011) Insights <> accessed on 16 January 2022.

[2] A. Ya. Asnis, M. A. Ivanova & Sh. N. Khaziev, Forensic valuation of intellectual property, 14 Theory and Practice of Forensic Science 40–45 (2019).

[3] King K. The Value of Intellectual Property, Intangible Assets and Goodwill // Journal of Intellectual Property Rights. 2002 Vol. 7. No. 3. P. 245–248.

[4] Nurse K. IP Value Capture: Fostering Trade by Capturing the Value of Creative Industries in Developing Countries // WIPOMagazine. October 2018. Special Issue. P. 4–11.

[5] Parr RL Intellectual Property: Valuation, Exploitation, and Infringement Damages. 5thed. New York: Wiley, 2018. 673 p.

[6] Murphy WJ, Orcutt JL, Remus PC Patent Valuation. Improving Decision Making through Analysis. New York: Wiley & Sons, 2012. 400 p.

[7] Anson WT IP Valuation for the Future: Trends, Techniques, and Case Studies. Chicago: ABA Publishing, 2018. 250 p.

[8] Brown RL (ed.) Valuing Professional Practices and Licenses. A Guide for the Matrimonial Practitioner. Fourth ed. New York: Wolters Kluwer, 2019. 2136 p.

[9] Okediji RL Creative Markets and Copyright in the Fourth Industrial Era: Reconfiguring the Public Benefit for a Digital Trade Economy. Geneva: International Center for Trade and Sustainable Development (ICTSD), 2018. 60 p.


Leave a Reply

Your email address will not be published. Required fields are marked *