JOINT ORDER OF THE MINISTER OF JUSTICE OF THE REPUBLIC OF KAZAKHSTAN, MINISTER OF THE INDUSTRY AND TRADE OF THE REPUBLIC OF KAZAKHSTAN, MINISTER OF ENERGY AND MINERAL RESOURCES OF THE REPUBLIC OF KAZAKHSTAN, MINISTER OF EDUCATION AND SCIENCE OF THE REPUBLIC OF KAZAKHSTAN

of April 6, 2004 No. 91, on April 6, 2004 No. 79, on April 6, 2004 No. 79, on April 6, 2004 No. 290

About approval of the Instruction for application of evaluation methods of intellectual property in case of implementation of scientific research, and also when entering intellectual property into the authorized capital of legal entities, including under the organization of venture productions

For the purpose of realization of Item 5.3.2.1 of the Actions plan for 2003-2005 on strategy implementation of the industrial and innovative development of the Republic of Kazakhstan for 2003-2015 approved by the order of the Government of the Republic of Kazakhstan of July 17, 2003 No. 712-1, it is ORDERED:

1. Approve the enclosed Instruction for application of evaluation methods of intellectual property in case of implementation of scientific research, and also when entering intellectual property into the authorized capital of legal entities, including under the organization of venture productions.

2. To impose control of execution of this order on the Vice-Minister of Justice of the Republic of Kazakhstan Asanov Zh. K., Vice-Minister of Education and Science of the Republic of Kazakhstan Bekturganov N. S., Vice-Minister of the industry and trade of the Republic of Kazakhstan Isekeshev A. O., first Vice-Minister of Energy and Mineral Resources of the Republic of Kazakhstan Izmukhambetov B. S.

3. This order becomes effective from the date of its official publication.

 

Minister of Justice of the Republic of Kazakhstan

O. Zhumabekov

Minister of the industry and trade of the Republic of Kazakhstan

A. Dzhaksybekov

Minister of Energy and Mineral Resources of the Republic of Kazakhstan

B. School student

Minister of Education and Science of the Republic of Kazakhstan

Zh. Kulekeev

Approved by the joint order of the Minister of Justice of the Republic of Kazakhstan of April 6, 2004 No. 91, of the Minister of Education and Science of the Republic of Kazakhstan of April 6, 2004 No. 290, of the Minister of the industry and trade of the Republic of Kazakhstan of April 6, 2004 No. 79, of the Minister of Energy and Mineral Resources of the Republic of Kazakhstan of April 6, 2004 No. 79 "About approval of the Instruction for application of evaluation methods of intellectual property in case of implementation of scientific research, and also when entering intellectual property into the authorized capital of legal entities, including under the organization of venture productions"

The instruction for application of evaluation methods of intellectual property in case of implementation of scientific research, and also when entering intellectual property into the authorized capital of legal entities, including under the organization of venture productions

1. General provisions

1. This Instruction for application of evaluation methods of intellectual property in case of implementation of scientific research, and also when entering intellectual property into the authorized capital of legal entities, including under the organization of venture productions (further - the Instruction) is developed according to the Civil code of the Republic of Kazakhstan, the Law of the Republic of Kazakhstan "About estimative activities" and Rules on application by the subjects of estimative activities of requirements to evaluation methods of intellectual property items approved by the Order of the Minister of Justice of the Republic of Kazakhstan of December 2, 2002 No. 184.

2. In this Instruction the following basic concepts are used:

1) security documents - provisional patents and patents for inventions, industrial designs, patents for useful models, selection achievements, certificates on trademarks or service marks, names of places of goods origin;

2) the final size of project cost of assessment - assessment project cost size received as result of the generalization of results of calculations of project cost of assessment proved by the appraiser when using different approaches and evaluation methods;

3) the license agreement - the agreement under which the owner of exclusive right on object of industrial property (licensor) grants to other party (licensee) the right temporarily to use the corresponding object of industrial property definitely;

4) license remuneration - compensation for provision of the rights to use licenses, "noukhaa" and others, being subject of the license agreement;

5) lump-sum payment - the certain, strictly fixed in the agreement amount of license remuneration which can be paid as in one-time procedure, and by installments;

6) royalty - the regular percentage allocations established in the form of certain fixed rates and paid by the licensee through the certain approved periods.

3. Obligatory assessment of intellectual property is carried out:

1) for privatization;

2) for the redemption and withdrawal of property at the owner for the state needs;

3) for cost determination of property of the debtor when he or the claimant object to assessment made by the legal executive.

4. Initiative assessment of intellectual property is carried out:

1) in case of implementation of scientific research, including under the organization of venture productions;

2) in case of development of innovative projects;

3) for calculation of remuneration of the authors who created intellectual property item;

4) in case of concession of the rights to intellectual property items;

5) in case of determination of form and size of license remuneration in case of assignment of rights according to the license agreement;

6) for attraction of investment resources;

7) when entering intellectual property into the authorized capital of legal entities, including under the organization of venture productions;

8) for receipt of the credit on the security of exclusive rights;

9) in other cases.

2. Approaches to assessment of intellectual property

5. The market or other value other than market is established by application of evaluation methods which are grouped in the specifics in profitable, costly and comparative approaches.

6. The choice of specific evaluation methods is determined by the purposes of assessment and available or available basic data. In case of application of each approach economic and legal service life of intellectual property items are considered.

7. The basic is the income approach. The cost approach is used as auxiliary and in cases when it is difficult to estimate object by means of income approach. Application of comparative approach is limited in view of uniqueness of intellectual property items and lack of information on commercial transactions with intellectual property items.

3. Income approach

8. The income approach is based on the economic principle of expectation and consists in determination of current value of future income from use of intellectual property item.

9. The income approach considers:

1) different types of the income and risks;

2) costly factors;

3) channels of cash flows;

4) probable terms of use of the rights;

5) the forecast of development of industry, amounts of the made products, market conditions.

10. In case of application of income approach of assessment the following methods are applied:

1) capitalization method of the income;

2) method of discounting of cash flows;

3) method of release from license remuneration.

11. The capitalization method of the income consists in assessment of intellectual property item on the basis of direct transformation of the income from use of this object to current value.

12. This method is used for the estimated objects bringing for equal periods of time equal among themselves or the cash flows changing identical rates from use of intellectual property items when preserving stable conditions of use.

13. Earnings capitalization allows with sufficient accuracy to determine the project cost of intellectual property when the income from its use is stable, for example, this income constitute constants on amount royalties (royalty) for use of the patented invention. The income to the taxation as assessment purpose - determination of market value of intellectual property item is taken into consideration.

14. In case of earnings capitalization the following works are carried out:

1) sources and the sizes of the net income which is brought in by assessment objects come to light;

2) the capitalization rate of net income is determined;

3) the cost of objects of assessment as private from division of net income into capitalization rate is calculated.

15. For determination of market value when using the intellectual property item which is bringing in the stable income, the annual earnings (to the taxation) gained from use of the estimated object for the current year it is multiplied by special multiplier (animator) M:

where Sd - the settlement size of cost of the estimated intellectual property item by method on the basis of income approach;

Е - the net income gained from use of intellectual property item;

M - the animator.

If the profit is permanent, then the animator is calculated by formula:

where r0 - the capitalization rate for steadily working companies of this industry expressed in shares.

The capitalization rate expressed in shares is calculated by formula:

where r - the capitalization rate expressed as a percentage.

If the profit steadily grows with speed, then

where g - rate of profit.

16. For receipt of assessment of the intellectual property item which is bringing in the stable or steadily increasing income animators and the capitalization rates calculated by special techniques on the basis of data of the stock market are used.

17. The method of discounting of cash flows represents process of reduction of all future cash flows from use of intellectual property items to date of assessment on certain discount rate.

18. This method is used for the estimated objects bringing for the equal temporary periods cash flows unequal among themselves from use of intellectual property items when preserving stable conditions of use.

19. When discounting cash flows the following works are carried out:

1) future cash flows constituting net income from use of objects of assessment are estimated;

2) the discount rate is determined;

3) the total current value of future income is calculated;

4) to the received result the cost of objects of assessment specified to current period increases.

20. The flow of the income of the current year is considered with coefficient 1, which consists of means which arrive or, shall be paid immediately. For each next year the coefficient of discounting turns out multiplication of coefficient for previous year at size

where hell - the discount rate expressed in shares.

The discount rate expressed in shares is calculated by formula:

where and - the discount rate expressed as a percentage.

Present value (Spr) is calculated by formula:

where Spr - present value of the final sequence of cash flows of Dp 0, Dp 1, Dp 2,..., DPT;

index 0 - indicator of use of the estimated asset in the current year;

indexes 1, 2 and... - indicators of use of the estimated asset next years;

index T - indicator of use of the estimated asset last year.

21. As the discounted income the net income, or cash flow can be used.

22. The method of release from license remuneration assumes that the owner of exclusive right on intellectual property item is exempted from need to pay license remuneration which it would be forced to pay if these rights belonged to other person. The essence of method consists that the project cost of intellectual property on which the license agreement is signed is considered as the current amount of all license fees according to this license agreement.

23. License fees are paid in the form of royalty or lump-sum payments.

24. The settlement rate of royalty is established on the basis of the analysis of domestic and foreign practice of the conclusion of license agreements. In cases when necessary data in sources of information are absent, the settlement rate of royalty can be determined by the analysis of economic effect or profit which the potential licensee as a result of use of subject of the license can receive.

25. The royalty rate in this case is determined by formula:

where R - settlement rate of royalty;

DL - the licensor's share in the profit of the licensee got from use of subject of the license agreement;

Р - estimated price of unit of production according to the license;

? Э - economic effect or the income at the potential licensee per unit of products according to the license.

26. The economic effect or the income received by the licensee when using subject of the license agreement can be determined as difference between the amount of sale of products by the license and cost amount of these products and the given costs for sales of products. At the same time all costs and arrival of the licensee shall be given by settlement year.

27. For determination of settlement royalty rate it is necessary to choose base of royalty. The base of royalty gets out so that the licensor and the licensee could gain income from use of subject of the license agreement in process of increase of production volume (sale) of products, use of technology on the basis of the license. Cost can form base to the made (sold) products, the fixed assignment from unit of licensed production, additional income from use of object according to the license.

28. If cost of the made (sold) products is accepted to base of royalty, then the settlement amount of license remuneration in the form of royalty is calculated by formula:

where CR - the settlement amount of license remuneration in the form of royalty;

Pi - the price of unit of production according to the license in i-ohm to year of action of the license;

Vi - amount of the planned production (realization) of products according to the license in i-ohm to year of action of the license;

Ri - royalty rate in i-ohm to year;

T - effective period of the license advanced in years;

i = 1,2,3... (T - 1), T - year of action of the license.

29. If the fixed assignment from unit of production according to the license is accepted to base of royalty, then the settlement amount of license remuneration in the form of royalty is calculated by formula:

where? P - the amount deducted from the unit of production made (implemented) according to the license.

30. If the additional income from use of the license is accepted to base of royalty, then the settlement amount of license remuneration in the form of royalty is calculated by formula:

where In - additional income of the licensee;

Ri - royalty rate in i-ohm to year as the licensor's share in the income of the licensee;

31. The size of cost of the estimated object is calculated by reduction of size of remuneration for the granted right to use of intellectual property item paid in the form of royalty during the term of its action on formula:

32. When using lump-sum payment the licensee acts as the creditor, and litsenziarpoluchatel of the credit. The licensor aims to receive such amount of lump-sum payments which being enclosed in bank, would provide the income, in size and on obtaining time equal to payment of license remuneration in the form of royalty. Using discounting method, it is possible to reduce the current payments in the form of royalty to lump-sum payment and, on the contrary, to reduce lump-sum payment to the average level of royalty for the entire period of action of the license agreement. As rate of discount effective rates of commercial bank on long-term loans, the average level of profitability on industry, income regulation on similar investments or the industry normative effectiveness ratio expressed as a percentage can be taken.

33. Thus, the formula of estimated price of the license in case of payment in the form of lump-sum payments can be presented in the following simplified form:

where SLP - estimated price of the license in case of payment in the form of lump-sum payments;

Ki - coefficient of transition (discounting) from payments in the form of royalty to lump-sum payments which is calculated by formula:

where i - period of time from signature date of the agreement before the date of receipt by the licensor of royalty in the corresponding year.

4. Cost approach

34. The cost approach consists in calculation of costs for reproduction of the estimated intellectual property items in current prices less obsolescence. Within cost approach the following methods are applied:

1) method of actual costs;

2) recovery cost method;

3) method of the given costs.

35. The major factors determining the cost of intellectual property items are:

1) costs of the owner of exclusive rights for creation (development), acquisition and enforcement of intellectual property items;

2) costs of the owner of exclusive rights for registration, patenting of intellectual property items, including duties, charges and other expenses on maintenance of security documents in force, including for modification and amendments in them;

3) costs for the organization of use of intellectual property items, including costs for their marketing;

4) insurance costs of the risks connected with intellectual property items;

5) effective period of the security document, license agreement at the time of assessment of its cost;

6) costs of the owner of exclusive rights for permission of the legal conflicts, including judicially, on the estimated intellectual property item;

7) the expected receipts of license fees on this intellectual property item (on condition of fixing of amounts of license fees);

8) the expected receipts in the form of compensation (penalties) payments (payments) on condition of confirmation of the facts of violation of exclusive rights of the owner of intellectual property;

9) object useful life;

10) obsolescence of the estimated object;

11) inflation.

36. The method of actual costs is based on summing of all actually made costs connected with creation of intellectual property item, its acquisition and bringing to condition during which its practical use is possible. The method of actual costs is applied, to determination of book value of intellectual property items. Intangible assets reflect in accounting records with reduction of cost estimates occurring at different times by settlement year and taking into account obsolescence of intellectual property items.

37. Project cost of intellectual property within method of actual costs is determined by formula:

where SZ (fact.) - the settlement size of cost of the estimated intellectual property item by method on the basis of cost approach;

C1 - costs for creation of intellectual property item, are the amount of actually made costs for accomplishment of research works (further - NIR) in full (from search to the report) and development of all stages of technical documentation (further - TD) calculated taking into account profitability. At the same time the given costs for NIR consist of costs for search works, including preliminary study of problem, marketing and another, on theoretical researches, on carrying out experiments, on carrying out testing, on services of third parties, on creation, consideration and approval of the report and other costs. The given development costs of TD consist of costs for accomplishment of the outline sketch, engineering design, working project, for accomplishment of calculations, for carrying out testing, for services of third parties, for carrying out designer's service, monitoring, for development of design and another. When NIR and/or the technical and project documentation are carried out partially, or creation of intellectual property item is preceded by carrying out only NIR or development of TD, calculation of project cost of intellectual property is made on costs for actually performed works.

C2 - costs for legal protection of intellectual property item (registration of application materials on receipt of the security document, correspondence on the request, payment for application, for conducting examination, for receipt of the security document, certificate, maintenance of the security document in force, for prolongation of effective period of the security document, for recovery of action of the security document, etc.). The component of C2 is absent for such intellectual property items as know-how, NIR, TD;

C3 - costs for marketing researches;

C4 - costs for bringing intellectual property item to readiness of industrial use and commercial realization.

The given cost estimates are any estimates (costs, profit, etc.) given by settlement year.

38. The method of cost of recovery consists in determination for date of assessment of all costs necessary for reproduction (reconstruction, recovery) identical to destination and to quality of object of assessment.

39. Assessment of intellectual property item by method of cost of recovery is determined by formula:

where Sz - the cost of recovery of intellectual property item;

Кс - coefficient of obsolescence (depreciation) of intellectual property item by final year of settlement period;

Zi - the costs for creation of intellectual property item incurred in i-m to year;

Ki - numerical value of coefficient of reduction of cost estimates occurring at different times by settlement year (coefficient of building-up of rates of bank interest) for i-go of settlement year;

Kii - the indexation coefficient considering change of price indexes for i-go of settlement year.

Кс - it is determined by formula:

where Tn - nominal effective period of the security document, license;

Тф - the actual effective period of the security document, license in final year of settlement period;

t - initial year of settlement period;

T - final year of settlement period.

40. The method of the given costs when calculating the current market value of object of assessment consists in recalculation of the actual last costs on creation and preparation for use of object of assessment in current value taking into account change of money in time.

41. Project cost of intellectual property within method of the given costs is determined by formula:

where Sz (ave.) - the given costs;

Сз (fact.) - actual costs;

Di - share of actual costs in i-volume to year, %;

Ki - numerical value of coefficient of reduction of cost estimates occurring at different times by settlement year (coefficient of building-up of rates of bank interest) is determined by formula:

1) for the period of time preceding settlement year:

2) for the period following after settlement year:

where E - the standard rate of reduction of cost estimates occurring at different times calculated by formula:

where? - bank interest (refunding rate);

tp - year in which cost assessment is led to settlement year (initial year of development of object of legal protection, initial year of action of exclusive rights on object, year of action of the license agreement, etc.).

5. Comparative approach

42. In the presence of enough reliable market information about transactions of purchase and sale of the objects similar to the estimated object the method of comparative sales is applied.

43. The method consists in comparison of the estimated object with similar, taking into account amendments on distinction of characteristics of the compared intellectual property items.

44. In case of application of method of comparative sales the following works are carried out:

1) information on the taken place transactions on similar objects of assessment gathers;

2) the list of indicators on which comparison of objects of assessment is carried out is determined;

3) the actual transaction prices on intellectual property items taking into account measure values of comparison with the estimated object are adjusted;

4) the cost of the estimated object on the basis of the corrected actual data is determined by the compared transactions.

45. Project cost of intellectual property within method of comparative sales is determined by formula:

where SSR - the settlement size of cost of the estimated intellectual property item by method of comparative sales;

Сс - the corrected object analog cost size for date of assessment compared to the estimated intellectual property item;

Пс - the cumulative amendment to the corrected object analog cost considering quantitative and high-quality distinctions between estimated and compared by intellectual property items.

46. The corrected object analog cost size for transfer on the estimated object is determined by formula:

where Sa - object analog selling price for transaction date;

To - the coefficient considering change of the inflation index from date of transaction before date of assessment for comparison with the estimated intellectual property item, calculated by means of special indexes (index deflator, industry indexes, consumer price indexes, etc.);

And - the size of charged depreciation from date of transaction on object analog before date of assessment of the considered intellectual property item is determined by formula:

where m - the period from the date of transaction on object analog before date of assessment in case of comparative analysis of sales (in months);

k - the complete term of depreciation determined proceeding from economic service life of the estimated object (in months).

The size of the cumulative amendment of Ps to the corrected size of cost of comparable objektaanalog of intellectual property considering quantitative and high-quality distinctions between characteristics of the estimated object and comparable analog is function:

where In - the country owner of intellectual property item;

Оп - industry or scope of intellectual property item;

Vee - type of the product made with use of intellectual property items;

The Party of Pensioners of Russia - completeness of the transferred rights (the simple, non-exclusive license; exclusive license);

Software - availability of legal protection (the security document);

Фп - payment method (lump-sum, royalty and/or combined);

TD - the territory of action of the security document or license;

Юсс - legal service life of the security document or license;

SPP - the term of the granted rights;

Sunday - extent of influence of intellectual property item on production new or on enhancement of the available product, or on diversification of products.

47. When calculating estimated value of intellectual property item using different methods the results having different values turn out.

48. For receipt of final size of project cost of assessment simultaneous accomplishment of estimative calculations by different methods, within profitable, costly and comparative approaches with the subsequent approval of results of calculations is carried out.

49. The final size of project cost of assessment can be counted as "arithmetic-mean" the values of costs received by different methods and as "weighted average" with the weight values accepted in proportion to comparative error of each method relatively each other.

The final size of assessment of subject of the SI on the basis of "arithmetic-mean" is determined by formula:

where the SI - value of final size of assessment of object, "statistically average assessment";

S - values of the cost estimates received by different evaluation methods;

n - quantity of the used evaluation methods.

50. The final size of assessment of subject of the SI on the basis of "weighted average" is determined by formula:

under conditions: 

Вд, Vz, Vsr - the weight estimates of costs (Sd, Sz, SSR) received in case of application of profitable, costly and comparative approaches, respectively and reflecting their relative importance.

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