Establishing Licensing Rates Through Options

17 Pages Posted: 20 Sep 2007

Date Written: September 11, 2006


Picture the situation. The company has spent millions developing a new technology, the patent has been issued, and the Intellectual Property holding company (IPH) is ready to leverage the innovation by licensing to various subsidiaries. At what rate should the licenses be structured? What about compliance? The transfer pricing specialists are called, and they come back with: "There are no close comparables!" It seems the new technology is truly innovative and conventional methods to determine transfer prices break down. What now?

Keywords: licensing, royalty rates, real options, intellectual property, valuation, patents

JEL Classification: G45, D30, O32

Suggested Citation

Torres, Fernando, Establishing Licensing Rates Through Options (September 11, 2006). Available at SSRN: or

Fernando Torres (Contact Author)

IPmetrics LLC ( email )

9320 Chesapeake Drive
Suite 110
San Diego, CA 92123
United States
858-223-0434 (Phone)


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