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Secured credit is a well known and deep-rooted institution. The basic premise is straightforward. A debtor gives her creditor a proprietary interest in one or more of her assets on the understanding that if she defaults the creditor can look to the liquidated value of those assets to satisfy the debt. In today's information and technology dominated economies, intellectual property rights (IPRs) are an increasingly significant component of the asset base of many prospective borrowers. Valuation and validation issues contribute to the reticence of financers to lend against the value of IPRs. However, an equal if not greater obstacle to IPR financing is the undeveloped and uncertain state of the applicable legal framework everywhere. This paper comes down solidly in favour of incorporating IPRs within the same secured transactions framework that applies to other categories of intangible movables. Indeed, I go further and advocate extension of that framework to outright assignments of IPRs by analogy to the approach taken in the area of receivables financing.
'A major contribution to the literature on the role of intellectual property rights (IPR) for the financing of innovation. The book is extensively researched and provides compelling insights for IPR managers, technology investors and policymakers trying to promote the efficiency of capital markets and national systems of innovation.' Knut Blind, Berlin University of Technology, Germany Following the transition of industrial nations to knowledge economies, the financing of technological innovation has become a central issue in public policy, corporate finance and business management. This detailed book examines the role of intellectual property rights in facilitating the financing of technological innovation as well as the role of policy makers, investors and managers in this process. The book's central finding is that public policy plays a key role in promoting the corporate disclosure of intellectual property-related information to enhance the efficiency of capital markets. This not only reduces the costs of capital for technology-driven firms but ultimately spurs innovation and economic growth. Intellectual Property Rights and the Financing of Technological Innovation will strongly appeal to research students and academics, policy makers, intellectual property professionals, equity analysts, credit rating analysts and executives in the pharmaceutical industry.
The lack of coordination and/or uniformity between the intellectual property and secured transactions mechanisms are clear impediments in the use of intellectual property as collateral. Even if the systems could begin to unify the approach and philosophical view of the status of intellectual property under the law, there remain numerous issues that will also need to be overcome before the lenders will view intellectual property as a viable asset for the securing of lending.
Economic development increasingly depends to a large extent on innovation. Innovation is generally covered by intellectual property (IP) rights and usually requires extensive funding. This book focuses on IP and debt financing as a tool to meet this demand. This book clarifies the situation of the use of IP as collateral in practice through a survey conducted in Japan on IP and debt financing. Various obstacles in the proper use IP and debt financing are identified, and some projects to facilitate its use are illustrated. IP and debt on a global scale, either by attracting foreign lenders or by collateralizing foreign IP rights, needs appropriate private international laws. This book analyzes such regulations in which the United Nations Commission on International Trade Law (UNCITRAL) has worked, paying due attention to the law of finance and insolvency law, as well as IP laws. However, further analysis is needed to identify under what conditions such solutions would show optimal effects. This book offers comprehensive analysis from an economic point of view.
The law of secured transactions has seen dramatic changes in the last decade. International organisations, particularly the United Nations Commission on International Trade Law (UNCITRAL), have been working towards the creation of international legal standards aimed at the modernisation and harmonisation of secured financing laws (eg, the United Nations Convention on the Assignment of Receivables in International Trade, the UNCITRAL Legislative Guide on Secured Transactions and its Intellectual Property Supplement, the UNCITRAL Guide on the Implementation of a Security Rights Registry and the UNCITRAL Model Law on Secured Transactions). The overall theme of this book is international (or cross-border) secured transactions law. It assembles contributions from some of the most authoritative academic voices on secured financing law. This publication will be of interest to those involved in secured transactions around the world, including policy-makers, practitioners, judges, arbitrators and academics.
The past three decades have seen a decline in traditional industries in the United Kingdom and there has been a relative decline in the value of physical assets to the UK economy. At the same time, the value of intangible assets seen in intellectual property rights have increased considerably. As such, IP rights represent important assets for companies and often comprise the foundation for market dominance and continued profitability. There is a structural uncertainty in the law relating to the use of IP as collateral for the purpose of raising debt finance and this may impact upon the survival of firms with high ratios of intangible to tangible assets. This article considers the proper goals for an effective credit and security regime in IP. It examines the significance of the availability of collateral to the lending decision and also considers whether the reluctance to maximise the use of IP as security reflects inherent difficulties which arise out of the nature of IP as economic assets. This has implications for the reform of English personal property security law and the development of bright line priority rules associated with Article 9 of the US Uniform Commercial Code which is often cited as a model for reform of English law.
This text thoroughly examines both the practical and theoretical issues involved in using intellectual property for collateral for corporate financing. With contributions from 18 leading intellectual property experts, it provides theoretical and policy analysis for Canada (including a definitive analysis of Quebec Civil Code theory and practice), the U.K. and the EU, the U.S.A. and Australia.
This book offers a comprehensive, easy to understand guide for startup entities and developing companies, providing insight on the various sources of funding that are available, how these funding sources are useful at each stage of a company’s development, and offers a comprehensive intellectual property strategy that parallels each stage of development. The IP strategies offered in this book take into consideration the goals that most startups and companies have at each stage of development, as well as the limitations that exist at each stage (i.e., limited available resources earmarked for intellectual property asset development), and provides solutions that startups and companies can implement to maximize their return on intellectual property investments. This book also includes a number of descriptive examples, case studies and scenarios to illustrate the topics discussed, and is intended for use by startups and companies across all industries. Readers will garner an appreciation for the value that intellectual property rights provide to a startup entity or company and will gain an understanding of the types of intellectual property rights that are available to companies and how to procure, utilize and monetize those intellectual property rights to help their company grow.
Consider the following hypothetical. You receive a frantic call from Dan Brown, asking you for assistance. Breathlessly, he quickly provides some pertinent information about his urgent matter. An unknown author a few years ago, Brown was thrilled to finish his manuscript, The Da Vinci Code. A kind and generous friend who operated a financing company (the Creditor) provided a $50,000 loan to him in exchange for a security interest in the copyright of The Da Vinci Code. Brown read the boilerplate security agreement, granting the Creditor a security interest in the “general intangibles,” and signed the document. The Creditor then filed the necessary documents stating that it has a security interest in Brown's general intangibles. Brown later wrote a sequel to The Da Vinci Code, building on the character of Dr. Robert Langdon, the Harvard symbologist that he had previously developed. In the meantime, Brown depleted the money and defaulted on the original loan, prompting the creditor to foreclose on the copyright and sell it to the Purchaser. The Purchaser, as the new copyright owner, now asserts that Brown violated the Purchaser's copyright because the sequel is a derivative work of the original. In addition, Miramax wants to make a movie and is ready to negotiate with the current owner of the copyright, the Purchaser, instead of Brown. Brown is frustrated, believing he has the derivative right for a movie option and control over his own creative output in writing a new sequel. Brown needs your help and he has your sympathy. Unfortunately for both Brown and you, neither copyright nor secured transaction laws directly address the issues at hand. That is the current state of collateralization of intellectual property. Here, the hypothetical presents the problem of the collateralization of a copyright of a book. What does it mean to collateralize intellectual property? It is well established that intellectual property assets are core and important to the growth of the economy. Companies, small and large, create, acquire, and hold intellectual property as corporate assets. To maximize the value of intellectual property corporate assets, companies turn these assets into collateral for secured financing. Despite the pervasive practice of using intellectual property assets as collateral in secured financing, very little scholarship has been devoted to understanding the collateralization of intellectual property. The majority of the scholarship in the past twenty years has focused only on perfecting a security interest in intellectual property. Neither courts nor scholars have addressed the fundamental question of collateralization. The Dan Brown hypothetical above demonstrates that the use of copyright as collateral has hidden costs, including depriving the author of the right to create new works. This Article argues that the process of the collateralization of intellectual property lacks transparency. Consequently, the current Article 9 of the Uniform Commercial Code (UCC-9) may unfairly advance secured creditors' rights at the expense of intellectual property creators-such as authors and inventors who are the debtors-and ultimately at the expense of society as a whole. Due to these hidden costs, the ongoing process of collateralization may prevent intellectual property creators from creating future works based on their early creations. This Article identifies and critiques the collateralization of intellectual property, revealing the complexity of intersecting secured transaction law, namely Article 9 of the Uniform Commercial Code, and doctrinal intellectual property laws such as patent law, copyright law, and trademark law. The inquiry challenges the silence surrounding the pervasive use of intellectual property as collateral in secured financing and suggests changes to the existing framework on secured financing law. The Article proceeds as follows: Part II discusses the normative intellectual property rights for patents, copyrights, and trademarks and how such rights are utilized as corporate assets. Part III describes different forms of financing available for companies and the use of intellectual property in financing. Part IV explains the UCC-9 regime as the law on secured financing, focusing on the rights of both the debtor and the secured creditor in the event of default. Part V frames the existing debate on security interests in intellectual property assets and analyzes how the revised UCC-9 addresses the debate. Part VI identifies and critiques the collateralization structure and its hidden costs. Finally, Part VII offers a proposal to minimize the hidden costs, provide better notice to all parties, and promote creativity and innovation.