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As part of Ethiopia’s legal framework reforms and the opening up of the economy, the government has introduced the use of intellectual property rights (IPRs) as collateral for bank loans. Following the Movable Property Security Rights Proclamation and the subsequent Movable Collateral Registry Directive, the National Bank of Ethiopia has begun facilitating financing backed by IPRs. According to news sources, this process has already begun, and nearly 70,000 entries have been registered in the Movable Collateral Registry.
One major issue that may arise is the valuation of these IPRs. What monetary value should be assigned to a specific right—whether a patent, trademark, or copyright? Valuing IPRs is a complex process that requires in-depth knowledge of the economy and the specific type of intellectual property involved. The process can be subjective, and there is no one-size-fits-all approach. However, the most commonly used valuation methods include:
- Cost approach: Values the IPRs based on the cost incurred to develop, acquire, or create the asset.
- Income approach: Values the IPRs using the income generated or expected to be generated by the asset.
- Market approach: Values the IPRs based on the prices paid for similar intellectual property assets in the market.
The importance of protecting intellectual property rights is not yet widely understood in Ethiopia. As a result, valuation of IPRs remains limited. However, the Ethiopian Intellectual Property Authority (EIPA) has developed an IPR marketplace to support commercialization of granted inventions by publishing detailed information and owner contact details. This platform allows stakeholders to directly assess and value IPRs, creating a new avenue for IPR valuation in Ethiopia.
Rewina Birhanu