Right of Publicity: How Much Is Your Client Really Worth? October Weston Anson, Chairman. CONSOR Intellectual Asset Management

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1 Right of Publicity: How Much Is Your Client Really Worth? October 2012 Weston Anson, Chairman CONSOR Intellectual Asset Management 1

2 Rights of Publicity Value: A Broad Range of Cases Jesse Ventura vs. WWF / Titan Sport Woody Allen vs. American Apparel Rosa Parks vs LaFace Records Yogi Berra vs Turner Broadcasting 50 Cent vs Taco Bell Paris Hilton vs Hallmark Cards Marlon Brando Estate 2

3 Woody Allen vs. American Apparel The establishment of value for rights of publicity for an unauthorized endorsement, and as litigation damages Customs and practices regarding rights ownership, usage, and fee structures Two valuation methodologies Prediction of likely jury award 3

4 Valuing Rights of Publicity Market Approach Comparable endorsement transactions Characteristic Endorsement Fee Maximum Fee $ 11,559,000 Upper Quartile 5,164,000 Median Fee 3,065,000 Lower Quartile 1,911,000 Minimum Fee 169,000 Cost Approach Cost to replicate advertising Billboards $750,000 Internet Ads $2,100,000 Social Media page views $2,500,000 Total Cost $5,350,000 Large Range for Celebrity Fees in Endorsement Deals What is the impact of replacing impressions? Prediction: $5 $7.5 million jury award 4

5 Valuation Methodologies Cost Income Market Economic principal of substitution Measures expense required to replace Neglects future benefit Replication / replacement feasible Benchmarking Present value of future economic benefit Requires projections and a risk assessment Requires allocation of benefit specific to the asset DCF Relief from Royalty Value based on price of similar assets Requires suitable comparable assets Comparable transactions Benchmarking 5

6 Paris Hilton vs Hallmark Cards Value for an unauthorized use of rights of publicity and as possible litigation damages Three possible approaches to establish damages and value: 1. Defendant s profits 2. Reasonable royalty on defendant s sales 3. Defendant s comparable license fees 6

7 Summary of Rights of Publicity Damages Hallmark s profits from Single Card Sales.. +/ $15,000 Reasonable Royalty (11%) on Sales +/ $8,000 Hallmark s Average of Comparable one Time License Fees. +/ $35,000 Range $8,000 $35,000 CONCLUSION $35,000 7

8 Publicity Rights Valuation: Marlon Brando Estate Projected Publicity Revenue (1 ) Thousands of Current Dollars July of Offers Acceptable 30.2% Discount Factor Discounted Value Net Present Value $1, Calculated as the average annual offers received and accepted in the six years prior to the date of death. 8

9 Criteria for Comparable Transactions Avoiding one-size fits all criteria 1. The licenses involve commercialization of the IP. 2. The intellectual property comes from the same family, (e.g. patents or trademarks or copyrights). 3. The comparable transactions involve the same geography, be it U.S. or international. 4. The comparable pieces of IP are equally well known or equally valuable. 5. The licensors be of relatively the same size. 6. The license agreements cover similar products and services. 7. The license agreements have similar lives and renewal terms. 8. The licenses have similar exclusivity or non exclusivity clauses. 9. The licenses should cover products that are similarly priced and sold through similar channels of distribution. 9

10 Criteria for Comparable Transactions Avoiding one-size fits all criteria 10. The licenses do not cover internal licenses or agreements between related entities. 11. The licenses were negotiated at a date relevant to the date at which the infringement damages are being fixed. 12. The comparable transactions have been negotiated between willing buyers and willing sellers, not under compulsion to license. 13. The IP covered by the comparable transactions had similar remaining useful lives. 14. The licenses have comparable non royalty compensation, both monetary and non monetary. 15. The agreements do not have what are known as tie in agreements (arrangements which require the licensee to purchase products or services from the licensor). 10

11 CONSOR s Services IP Valuation Valuing patents, trademarks, copyrights, trade secrets, celebrity rights, and technology Helping businesses understand the value of their IP Valuation for transactions, tax purposes, litigation, licensing deals, and more IP Litigation Support Assisting attorneys with damage calculation parameters & case strategy Proven success as expert witnesses Economic damages in litigation Federal, state & international experience Arbitration, and mediation Licensing Consulting Assisting clients in maximizing the licensing value of their IP assets Develop licensing strategies, execute, negotiate license agreements Licensing experts in litigation Evaluate financial and economic commitments of a potential transaction IP Transactions Maximize the value of assets Identify valuable IP Market and sale of bankrupt IP assets Value and dispose of intellectual property 11

12 CONSOR Books Published by the American Bar Association and SIPO 12