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Royalty Relief

The royalty relief method determines the value of an intangible asset by estimating the royalty payments that would be incurred if the asset were licensed by a third party. For example, to judge the value of a patent using this method, the valuator would research licensing agreements for similar patents. Based on these agreements, they would estimate the royalty rate that a hypothetical licensee would be willing to pay to use it. By applying this royalty rate to the revenue generated by the patent, the valuator can calculate its fair market value. The method can also be applied to trademarks, brands and other intangible assets.