To a certain degree, software appraisal is not unlike patent appraisal, except that for the latter, appraisal takes into account factors specific to procedures relating to the granting and renewal of patents, such as the period of protection, patent defense strategy, its actual production or the possession of a cohesive set of patents.

Software, in France,  is not patentable and only protected by copyright law. However, software might be subject to foreign patents, Patent Cooperation Treaty (PCT) or others.

Several key questions beg asking in the appraisal of the intangible assets that software constitutes:

• What portion of an application can be considered free software and what is the impact on its value? 

The integration of free or third-party software, facilitated by “object” technologies, is today unavoidable for the software designer seeking to achieve attractive performance and functionalities at reasonable cost.

An exacting appraisal of free software used is conducted by ESALAB using its appraisal tools.

It enables the assessment of risks, excluding these from the appraisals .

•  Must we estimate how much it cost to develop the software application, or how much it should have cost? 

Particularly in terms of innovative technologies or concepts, development may have brought about trial and error, setbacks, inconclusive research or uncertain results, but which in short contributed to the development of the software or the innovative intangibles, as well as to the validity of its functionalities and commercial performance. On the other hand, some research work may not at first glance appear directly and totally related to the software development. For our part, we consider that the uncertainty of research and development forms an integral part of software design, and that it is the total value of the efforts culminating in development that must be taken into consideration. Likewise, the technological or functional complexity has an impact on the cost of development for the software. In our model, these are taken into account by factors that correct the quantitative appraisals.

 

•  Must we consider the human factors intervening in the value of a software application, which is essentially an intellectual work?

    

The human factor impacts the appraisal of an application more deeply than it expresses human organization, know-how or business activity. This aspect is taken into account on many levels in our appraisal model. On the one hand, by valuating pre-development conclusions and contributions – especially functional – once the software has reached a successful outcome attributable to several years of experience and know-how. On the other hand, this factor strongly impacts the present and future profits of the software, and by consequence, estimations based on income.

        

•  The value of a software application is not fixed. Must we estimate its durability?

Software requires a constant investment in know-how and new functionalities to preserve its economic and commercial performance. Likewise, the risks of becoming technically obsolete, the shelf life of the technologies used and the changes in regulations that could impact functionalities must be examined. In this way, the estimated cost of a potential redesign of the software must be assessed in expenditures when the risk of becoming obsolete is imminent and great.

The foreseeable shelf life of the software indicates the length of time to be factored into estimations based on future income.