The use of intellectual property (IP) assets as collateral for business financing is a possible innovative solution to expand access to credit, especially for small and medium-sized enterprises (SMEs) in developing countries.
According to the recently launched manual by the World Intellectual Property Organization (WIPO), rights such as registered trademarks, patents, industrial designs, and copyrights with economic exploitation, including software, can be used to secure financial operations.
This approach is especially advantageous for technology, design, and media-focused SMEs, which often lack tangible assets but possess valuable intellectual property rights, according to Luiz Fernando Plastino, a lawyer at Barcellos Tucunduva Advogados, an expert in Intellectual Property and a PhD in Civil Law from USP.
“However, in theory, any negotiable intellectual property right can be used to secure financing. In countries like the United States, we have a history of using copyrights at least since the end of the last century. In Continental Europe, we have discussions about copyrights and trademarks used as collateral since the 19th century. In Brazil, we have seen trademarks used as judicial collateral, but it is still not common to see these rights used in financing,” he explains.
Often, SMEs, especially those focused on technology, design, or media production, do not have tangible assets suitable for securing a loan, for example, but they have valuable intellectual property rights and can use this value to obtain financing, provided the financial institution is willing and prepared to accept them. “Many companies, even financial institutions, do not know that it is even possible to structure this type of operation, because it is not widely studied and we still do not have much jurisprudence on the subject,” says Plastino.
In his doctoral thesis defended at the USP Law School, titled “Author’s patrimonial rights as movable property: repercussions on security rights,” Plastino raises the issue that companies would have much to gain from this practice. “These companies may discover a treasure when valuing their intellectual assets, which is done in ways different from what is normally practiced with material assets, such as real estate or equipment.”
The new WIPO manual presents various models, ranging from the assignment of intellectual property and back licensing to the establishment of security rights over the right itself, direct investment, and the securitization of royalty payments. “Previous WIPO material used to focus on the latter format, which became famous for being the model pioneered by David Bowie to finance his releases in the 1990s,” he recalls.
For the expert, it is important to emphasize that the WIPO manual analyzes the problem from a negotiation perspective without anchoring itself in the law of any country. “My doctoral research focused on how these structures should take legal form in Brazil, primarily considering copyrights and software rights. It is important to know how to carry out these activities so that neither party is left in the lurch,” argues Plastino.
The WIPO manual (“Hands-on IP Finance: Securing Loans with Your IP Assets”) is available on its business financing page: https://www.wipo.int/en/web/ip-financing
