Industry Updates

So Just How Big Is Your Brand? And What’s It Really Worth?

01 Dec 2011

Get The Answer With ISO 10668:2010

The intangible assets of a business, including its brands are often said to be their most valuable assets. However, as brands are intangible assets, convincing others of the actual monetary value of a brand depends on acceptance and credibility of the method of valuation.

In October last year, in a significant development for brand valuation methodology, the International Standards Organisation (ISO) published an international standard for monetary brand valuation.

ISO 10668:2010 “Brand valuation – Requirements for monetary brand valuation” specifies uniform requirements and procedures for monetary brand value measurement.

“Unsurprisingly, the ISO standard rubber-stamps the three main methods of brand valuation that have commonly been used by legal practitioners and financial services professionals to evaluate brands. ISO 10668:2010 states that brands may be valued by applying the income, market or cost approaches,” says Christophe van Zyl, senior associate at IP law firm Adams & Adams. “It also details how each approach is to be implemented.”

According to van Zyl, the ISO guideline is significant for a number of reasons.

Among these is uniformity.  “There have always been personal preferences of the approaches by individual practitioners when measuring brands. ISO 10668:2010 creates uniform procedures and methodologies for each of the three main methods of brand valuation,” says van Zyl.

Practicality also constitutes an important part of the evaluation. According to van Zyl, it is now possible to create an acceptable standard of valuation for both the seller and the purchaser by stating that the value of the brands shall be determined according to a particular method and in accordance with specific guidelines in ISO 10668:2010.

“ISO 10669:2010 should be embraced by authorities, businesses, auditors and even business brokers. It brings integrity to brand evaluation. If the guidelines of ISO 10669:2010 are applied, it becomes more difficult to inflate or reduce the apparent value of a business by using methodology or procedures that are unconventional or inconsistent with consistent practices.

“ISO 10669:2010 could in many ways be seen as an acceptable boni mores for brand value auditing.”

Van Zyl says there are a number of definitions for a “trade mark” in legislation that regulates the monopolisation of signs that are used to distinguish goods or services in the course of trade.

“Statutes in different countries are not consistent. Also, a brand from a financial perspective and a trade mark in a legal regulatory sense are not seen by industry to be one and the same. ISO 10668:2010 provides certainty in defining a brand.”

For the purpose of brand evaluation, ISO 10668:2010 defines a “brand” to be:
“a marketing related intangible asset including, but not limited to, names, terms signs, symbols, logos and designs or a combination of these, intended to identify goods, services, entities, or a combination of these, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits/values.”

Van Zyl says it is notable that ISO 10668:2010 does not make it compulsory for a brand to be registered as a trade mark in order for it to be identifiable as an asset that may be separated from the goodwill of a business. “It is significant, as the Courts in many countries, including South Africa, have indicated that a so called “unregistered” trade mark cannot be separated from the goodwill of a business and must be sold together with a business as a going concern.”

The current definition of a “brand” is intended to avoid technical legal issues when determining the value of a business for the purposes of a sale transaction but, for many purposes, a mark will have to be registered in South Africa for a valuation to be relevant.

At this time ISO 10669:2010 has not been recognised by the South African Bureau of Standards. “However, as ISO 10669:2010 is applicable in various countries that are members of the International Standards Organisation, ISO 10668:2010 is a standard that is practical and ought to be considered as a guideline for brand evaluation in South Africa,” says van Zyl. Copies of ISO 10669:2010 may be purchased from the ISO through its website.

About Christophe van Zyl
Christophe van Zyl graduated in 2005 with an LLB degree from the University of Pretoria and commenced articles at Adams & Adams in 2006. He qualified as an attorney in 2008 and a Trade Mark Practitioner in 2009. Christophe specialises in trade mark and branding litigation, copyright issues, advertising and marketing law, unlawful competition, domain name disputes and general legal advice regarding commercial aspects of intellectual property.