MAJA Sportswear x Jeep Collaboration: Opportunity for Intangible asset valuation

MAJA COPYRIGHT 2025

If MAJA Sportswear wants to capitalize the intellectual property (IP) instead of treating it as a royalty expense, the company must prove ownership of the creative assets. Here’s how to structure the process and support the valuation:

1. Key Approach:

Transferring IP from Employees to MAJA Sportswear

Since the designers and creative team are on MAJA’s payroll, any intellectual property they create may or may not automatically belong to the company. To ensure full ownership and capitalize the IP, the following steps are essential:

Step 1: Establish Ownership of IP Created by Employees

To legally recognize and capitalize the IP, designers and creatives should:

✅ Sign an "IP Assignment Agreement" as part of their employment contract. This agreement ensures that all creative work (designs, photos, videos, blog content, etc.) belongs to MAJA Sportswear from inception.

✅ If they have already created work without a prior agreement, they should register copyrights under their name and then transfer (assign) those rights to MAJA through a Copyright Assignment Agreement.

📌 Why is this important? Without clear legal ownership, tax authorities may not allow capitalization, as the company doesn’t fully control the IP.

Step 2: Register & Protect the IP

✅ Trademarks & Designs: Register any logo, unique fashion patterns, or distinctive design elements with the relevant intellectual property office.

✅ Copyrights: MAJA should register photos, videos, blog content, and fashion sketches to strengthen ownership claims.

✅ Patents (if applicable): If the collection includes innovative sustainable materials (e.g., new waterproof fabric), patenting may add valuation credibility.

2. How to Support the Valuation of the Capitalized IP?

To justify capitalizing the IP instead of expensing royalties, MAJA needs financial documentation to support the valuation. T

he best approach is to estimate the Fair Market Value (FMV) of the IP using:

Method 1: Relief-from-Royalty Method

(Adjusted for Internal IP)

Even though MAJA is not paying external royalties, it can still calculate how much it would have paid if the creative team were external.

• Example: If an external licensing agreement for a similar campaign would require a 7% royalty on $10M in revenue, then:

IP Value = 700,000​/0.10 = 7M

• Supporting Documents Needed:

  
  

  ✅ Market research reports on royalty rates for fashion designers and creative content

  
  

  ✅ Benchmark agreements from third-party designers, agencies, or licensing deals

Method 2: Cost Approach

(Internal Development Cost Method)

This method values the IP based on the total cost of development, including salaries of the designers, photographers, videographers, and marketing team.

• Example: If MAJA’s creative team spends $1.5M annually on developing the campaign and the content is expected to generate revenue for 5 years, then:

IP Value = Total Value of Creation + Reasonable Markup for Profitability

IP Value =(1.5x5)+ (30% markup) 2.25M= 9.75M

• Supporting Documents Needed:

  
  

  ✅ Payroll records of the creative team

  
  

  ✅ Time-tracking reports showing work hours spent on the campaign

  
  

  ✅ Industry cost benchmarks for similar marketing & fashion design projects

3. Tax & Accounting Implications

✅ Capitalization & Amortization

• Instead of treating the IP as an expense (reducing taxable income immediately), MAJA can capitalize it as an intangible asset on the balance sheet.

• The IP can be amortized over 5–10 years, reducing taxable income gradually.

✅ Tax Deductions & Credits

• If MAJA is developing sustainable fashion technology, it may qualify for R&D tax credits in some jurisdictions.

• Certain countries offer IP tax incentives for companies that create and own intangible assets.

📌 Key Documentation for Tax Compliance

• IP Valuation Report (detailing the chosen valuation method)

• Financial statements reflecting capitalized IP

• Legal agreements proving ownership of the IP

• Supporting cost records (salaries, development expenses, market benchmarks)

Final Answer: How to Justify the Capitalization of IP Instead of Paying Royalties?

1. Ensure full ownership by making sure the creative team signs IP Assignment Agreements or transfers rights to MAJA.

2. Register copyrights, trademarks, and designs to formally protect the IP.

3. Support valuation using industry-accepted methods, including:

   • Relief-from-Royalty Method (if the company would have had to pay for IP externally)

   • Cost Approach (based on internal development costs)

   • Income Approach (based on projected future cash flows)

4. Maintain strong financial & legal documentation to justify the capitalization for tax and accounting purposes.

Relief-from-Royalty Valuation Example

In this example, MAJA Sportswear, a high-end sustainable outdoor clothing brand, collaborates with Jeep to create a limited-edition adventure-inspired fashion collection. The collaboration includes intellectual property (IP) elements such as:

1. Brand Name & Logo Usage (MAJA Sportswear x Jeep branding)

2. Fashion Designs (developed by a renowned designer)

3. Audiovisual Content (videos, images, blog posts, campaign assets)

4. Marketing & Advertising Rights

5. Licensing Agreements for Third-Party Rights Holders

   
   

Step 1: Identify the IP Holders & Licensing Agreements

For this collaboration, several IP rights need to be considered:

Intangible Asset	IP Owner (Imaginary Third Party Right Holders)	Licensing Agreement Scenario
MAJA Sportswear Brand & Logo	MAJA Sportswear	Jeep would pay a royalty fee to use the MAJA Sportswear name and vice versa
Jeep Brand & Logo	Jeep (Stellantis)	MAJA Sportswear would pay a fee to use the Jeep logo on its apparel
Exclusive Fashion Designs	Head Designer (Independent)	MAJA Sportswear licenses the designs from the fashion designer
Audiovisual Assets	Creative Agency (Third-Party Content Creators)	MAJA Sportswear licenses videos, images, and promotional materials

Each of these parties would typically demand a licensing royalty fee for the use of their intellectual property.

Step 2: Define the Revenue from the Collaboration

Let’s assume:

• The total expected revenue from the MAJA x Jeep collection is $50 million over five years.

• Since fashion designs are a core asset in the collection, they directly contribute 60% of total revenue ($30M).

• The marketing and campaign materials (videos, images, blog content, and social media assets) contribute 20% of total revenue ($10M).

• The remaining 20% of revenue is driven by Jeep’s brand power, retailer distribution, and other factors ($10M).

• 
  

💡 Why does the campaign contribute only 20% of sales?

• The fashion designs themselves are a primary revenue driver (60%), as they define the uniqueness of the collection.

• The campaign is essential for visibility, but it does not directly create the product—it enhances reach, engagement, and desirability.

• Jeep's own brand presence and retail partnerships (20%) also contribute to sales by bringing the product to a large audience.

Step 3: Determine an Appropriate Royalty Rate

• Fashion design royalties typically range from 5% to 15% depending on exclusivity. Since the fashion designer owns the designs, we assume a 10% royalty rate on the $30M design-driven revenue.

• Branding & marketing content (videos, images, blog posts, and campaign assets) typically command 5% to 10% royalties. We assume 7% on the $10M marketing-driven revenue.

Royalty Rate Assumptions:

1. Fashion Designer’s Licensing Fee: 10% of $30M = $3M over 5 years

2. Marketing & Content Licensing Fee: 7% of $10M = $700K per year

Step 4: Calculate the Present Value of Royalty Savings

Since MAJA Sportswear owns its marketing content but would otherwise have to pay a third party for licensing, we calculate the savings.

Using a discount rate (WACC) of 10% and a 5-year period, we use the Present Value of an Annuity formula:

−n

PV = Annual Royalty × (1−(1+r)​/r)

For content licensing (videos, images, blogs, social media assets):

PV=700,000 × ((0.101−(1.10)−5​)/5)

PV=700,000×3.79

PV=2,653,000

For fashion design licensing (paid to the designer):

PV=3,000,000 × ((0.101−(1.10)−5​)/5)

PV=3,000,000 × 3.79

PV = 11,370,000

Step 5: Final Valuation of the Collaboration’s IP

• Total estimated intangible asset value for marketing content: $2.65 million

• Total estimated intangible asset value for exclusive fashion designs: $11.37 million

• Total IP Valuation (Content + Designs): $14.02 million

Key Takeaways

1. MAJA Sportswear benefits by owning its campaign assets instead of paying $700K per year to third-party content creators.

2. The head designer's exclusive designs contribute significantly to the collaboration's success, valued at $11.37M over five years.

3. If MAJA Sportswear had to license all IP from third parties, it would need to pay $14.02 million in licensing fees.