Intangible Assets and Intellectual Property
Intangible assets are the hidden gems that power our knowledge-driven global economies. These assets include intellectual property (IP) rights, as well as related assets like brands and software. While often invisible in financial reports, intangible assets play a crucial role in fueling innovation, productivity and economic growth.
What are intangible assets?
Intangible assets lack physical form. Instead, they derive their value from ideas, knowledge, innovation, and reputation. Examples include IP rights like patents, trademarks, designs, copyrights, and trade secrets, as well as related assets like software, and brands. Unlike their tangible counterparts such as buildings and machinery, intangible assets may be more difficult to quantify but equally important.
Measuring Investment in Intangible Assets
The investment in intangible assets is growing in most high-income economies and several middle-income countries. In some countries, such as the United States, such investment even surpasses investments in tangible assets.
Learn more about measuring investment in intangible assets and why it can be challenging.
Learn more about measuring investment in intangible assets and why it can be challenging.
The importance of intangible assets
Intangible assets drive competitive advantages, innovation, and economic growth. For businesses, they create long-term value through the creation of a market niche, increasing revenue and profitability. For example, a company’s brand recognition can convey quality and reliability to customers. As a result, these intangible assets contribute to increased sales and may command higher prices. Sometimes, the contribution of these assets can be even higher than those coming from tangible assets like production equipment.
For universities and research institutions, intangible assets can attract funding, collaborations, and talent. Intangible assets play a critical role in shifting technology from the lab to the market, providing an economic incentive to transfer knowledge.
The value of corporate intangible assets
Recent estimates from Brand Finance used in the Global Innovation Index (GII) suggest that the global value of intangibles has been growing rapidly over the last 25 years to reach around USD 62 trillion in 2023. The most intangible asset-intensive economies are the US (with Apple leading among the most intangible asset-rich firms), followed by Ireland, Denmark, the UK and France.
The asset mix owned by companies reflects this fundamental shift: intangibles make up about 90% of the value of companies in the S&P 500.
According to WIPO’s World IP Report (2017), intellectual property (IP) and other intangibles contribute on average twice as much value as tangible capital to products manufactured and traded along value chains.
Intangible assets and finance
Intangible asset finance is still in its beginning stages in many parts of the world, with governments and the private sector taking different approaches to this field.
Improving access to finance
Intangible assets have the potential to improve access to finance. While traditional collateral often uses tangible assets like real estate or equipment, the most valuable assets businesses own can be intellectual property and related intangibles. These assets can provide comfort to lender and investors. An IP strategy aligned with commercial objectives can provide increase a company’s potential for future growth and create revenue. In addition, intangible assets often have standalone value, which can help recover losses in the case of default or business failure.
WIPO is working on moving IP finance from the margins to the mainstream. Read more about WIPO’s work on IP Finance.
Valuing intangible assets
There is no single methodology for valuing intangible assets. Depending on the type of asset at hand, context and data availability, often a combination of different approaches is used. In most cases, the value of intangibles can be estimated considering the future economic benefits associated with the asset, like projected cash flows. However, for many intangibles in practice this can be difficult. The cost to repurchase or recreate an asset or comparison with transactions involving similar assets are also common methods to determine value. The valuation process involves professional judgment and a structured approach, and may require information from other domains to get a complete picture.
WIPO has formed an Expert Consultative Group on valuation of intangible assets, made up of experts around the world to consider how to make progress on these issues.
Report series: Unlocking IP-backed Financing – Country Perspectives
This Series provides an opportunity to deepen dialogues around IP-backed financing, sharing best practices and shedding light on what it will take to mainstream.