Foreword
You may not expect iconic British rock star David Bowie to have much in common with the topic of intellectual property finance. But he is the frontman of an often-cited example of collateralising IP in raising debt capital. In 1997 with “Bowie Bonds”, he raised debt capital by securitising the future royalty revenues from his music catalogue.
Since then, the breadth of IP financial products has grown and the concept has spread globally. The number of financial institutions interested in lending against IP has multiplied, in part because of the recent emergence of IP insurance that protects lenders in the event a borrower defaults on a loan.
Other forms of IP insurance can protect a verdict against the risk of reversal in post-trial proceedings or on appeal. Meanwhile, patent litigation has emerged as a favourite for third-party litigation financiers. Those deep pockets are fuelling patent owners – with high-quality assets that are valid and infringed – who otherwise could not afford the high cost of entry into the court system.
IAM’s report contains practical guides for chief IP counsel who want to learn how to tell their IP story to venture capital investors. We provide a primer to use intellectual property to obtain debt finance, purchase an IP insurance policy, or attract the eyes of a third-party litigation funder for a patent litigation campaign.
There has never been a better time to get to grips with IP finance. While the United States has high damages awards, some predict the emergence of the Unified Patent Court in Europe will be a game-changer.
The pan-European court covers a population that rivals that of the US. Litigation financiers are already backing UPC cases and report that patent holders are calling to evaluate financing for their unified patent campaigns. What is yet to be seen is whether the UPC will award damages that equal some of the eye-popping sums that emerge from US patent litigation.
The US also has one of the most mature markets for IP-collateralised lending and insurance cover. But there are now examples of debtors who defaulted on loans. This has spurred insurers and lenders to institute new safeguards in their qualifications and diligence processes, plus, the cost of capital is rising with the risk.
We also cast our eyes further ashore, to Asia, which is developing a vibrant IP finance ecosystem with China emerging as a clear leader, followed by South Korea. Our report also traces developments in Japan, India, Singapore and Indonesia.
It is an interesting time to be tasked with utilising IP to extract value and attain business goals. We aim for this report to show you how the newest IP finance products allow you to do just that.