Brand and IP Valuation: Economic Control vs. Legal Title

Intangible assets, especially brands and intellectual property (IP), represent over 90% of corporate value in global enterprises. While trademarks provide legal rights, their true worth emerges through economic activity – marketing, consumer engagement, and brand loyalty – creating a key distinction between legal ownership and economic control.

Case studies reinforce this divide. Nestlé India shareholders resisted increased royalty payouts to the Swiss parent, citing local brand-building efforts. Hyundai India’s IPO also highlighted that despite trademarks being legally owned by Hyundai Korea, significant equity was created in India.

This divergence makes valuation essential, particularly in transfer pricing where tax authorities scrutinise royalty payments, advertising spends, and brand promotion. Courts increasingly apply the principle of substance over form, leading to disputes around AMP expenditure, bright line tests, and allocation of profits. The OECD’s DEMPE framework – Development, Enhancement, Maintenance, Protection, and Exploitation – supported by FAR analysis and income-based valuation methods, ensures arm’s length outcomes aligned with economic contributions

BACKGROUND AND INTRODUCTION

In today’s business environment, intangible assets have become vita