Contractual Rights Valuation

In a case involving an advanced system used to treat inoperable cancer, a medical device manufacturing company sued a competitor for patent infringement, unfair competition, and deceptive trade practices.

In a case involving an advanced system used to treat inoperable cancer, a medical device manufacturing company sued a competitor for patent infringement, unfair competition, and deceptive trade practices. The manufacturer retained George Strong of Cornerstone Research to determine the value of an exclusive contractual right to make offers for sale, as opposed to the value of actual sales made (that is, lost profits).

Cornerstone Research supported Mr. Strong in creating a probabilistic model of potential future sales and an expected ex ante valuation of the contractual rights.

Given the tens of millions of dollars involved in a single sale of the system, just one sale over 10 years was expected to generate profits to the seller of more than $10 million. Cornerstone Research supported Mr. Strong in creating a probabilistic model of potential future sales and an expected ex ante valuation of the contractual rights. The case settled.