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Singapore – A Penny For Your Thoughts (And Thousands For Your Expression): IP Financing.

1 April, 2014

 

Legal News & Analysis – Asia Pacific – Singapore – Intellectual Property

 

Imagine going to the bank and using your films to get financing, issuing bonds on the strength of your patents or buying into a fund invested in trade mark portfolios – these may be some of the ways IP can be used for financing in the near future.

 

Although not new, the idea of IP financing was mooted in the Intellectual Property (IP) Hub Masterplan (“Masterplan“) launched in April 2013, by a steering committee set up by the Ministry of Law of Singapore to provide a blueprint for IP development until 2023.

The Masterplan has three strategic outcomes. Two of the Masterplan’s outcomes – to make Singapore a hub for (i) IP filings and (ii) IP dispute resolution – have received the lion’s share of attention.

 

However, a year into the Masterplan, there is renewed interested being shown in the third outcome – to make Singapore a “Hub for IP transactions and management” – through the development of a vibrant IP marketplace as well as facilitating IP transactions by increasing access to IP financing. One type of IP financing is in IP-back loans, which are loans secured by a company’s IP assets as collateral. 


IP As Collateral 


As a start, the Masterplan sees the government partially underwriting the value of IP used as collateral, for IP rich companies to access capital for growth. 


Financial institutions in Singapore have tended to be cautious towards lending on the back of intangible asset classes such as patents. Besides these assets being relatively untested, there is the risk of using novel technology as collateral.


Patents for instance may be declared invalid (causing values to plummet), or may rise and fall in value dramatically depending on the state of the art and what the next technology frontier is. 


IP-rich, technology focused companies without “traditional” assets have difficulty convincing lenders to bankroll their next phase of growth. 


To kickstart the lending, and to attract regional technology companies to relocate to Singapore, the government plans to take on some of the risk in lending to IP-centric ventures. 


While the scheme has yet to be launched, the Masterplan suggests that financing of early stage IP will be left to venture capital and private equity investors, with the government supporting financing by financial institutions. It is unclear whether the government will underwrite only financial institutions such as banks, or other lenders.

 

IP Valuation

 

Complementing the initiative of using  IP as collateral, the Masterplan also recommends the government to  develop and invest in IP valuation. 


IP valuation can be subjective and tricky. The Masterplan notes that the complexity in valuation is “due to features unique to IP: different types of IP, different maturity periods and applications of the IP, lack of market transparency, complex and evolving technological landscapes, uncertainty in potential economic damages in infringements, and the fact that IP by design are ‘one of a kind'”.

 

Yet at the same time valuation is crucial to financing any activity using IP.
Companies should seriously consider how they may employ their existing IP as collateral to finance next stage developments, and how such financing should be structured.

 

For now, the ball is in the government’s court to pilot innovative schemes that have buy-in from both financial institutions and the private sector.

 

For more information on the IP Hub Masterplan, go here

 

ATMD Bird & Bird

 

For further information, please contact:

 

Jinesh Lalwani, ATMD Bird & Bird

[email protected]

 

ATMD Bird & Bird Intellectual Property Practice Profile in Singapore


Homegrown Intellectual Property Law Firms in Singapore 

 
 

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