Incentive financing through intellectual property assets can be advantageous for technology SMEs

The use of intellectual property (IP) assets as collateral for corporate 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 released World Intellectual Property Organization (WIPO) manual, rights such as trademarks, patents, industrial designs and economically exploited copyrights, including software, can be used to secure financial transactions.

This approach is especially advantageous for technology, design and media-driven SMEs, which often lack tangible assets but have valuable intellectual rights, according to the report Luiz Fernando Plastino, lawyer at Barcellos Tucunduva Advogados, specialist in Intellectual Property and doctor in Civil Law from USP.

“But in theory any intellectual property right that is negotiable can be used to secure a financing. In countries like the United States, we have a history of using copyright at least since the end of the last century.In the countries of Continental Europe, we have discussions about copyright and trademarks used in warranty since the XIX century. In Brazil, we have seen trademarks used as judicial guarantee, but it is not yet common to see these rights used in financing”, he explains.

Often SMEs, especially those focused on technology, design or media production, do not have their own tangible assets to guarantee a loan, for example, but they have valuable intellectual rights and can use this value to obtain financing, if the financial institution is willing and prepared to accept them. “Various companies, even financial institutions, do not know that it is even possible to structure this type of operation, because it is not something much studied and we still do not have much jurisprudence on the subject”, says Plastino.

In the doctoral thesis defended at the USP School of Law, entitled “Proprietary law of author as a movable asset: repercussion on the rights of guarantee”, Plastino raises the question that companies would have much to gain from this practice. “s such companies can discover a treasure by making the valuation of their intellectual assets, which is made in different ways than is usually practiced with material assets, such as real estate or equipment”.

The new WIPO manual brings several models, ranging from the transfer of intellectual property and licensing back and constitution of guarantees on the right itself to direct investment and securitization of the receipt of royalties.“O previous WIPO material used to focus on this last format, which was famous for being the model inaugurated by David Bowie to finance its launches in the 1990s”, he recalls.

For the expert, it is important to emphasize that the WIPO manual analyzes the problem from the point of view of negotiation and without standing on the law of any country. “My doctoral research focused on how these structures should take legal form in Brazil, thinking mainly about copyright and software. It is important to know how to carry out these activities so that neither party is in the hands of”, argues Plastino.

The WIPO manual (“Hands-on IP Finance: Securing Loans with Your IP Assets”) is available on its page on financing for companies: https://www.wipo.int/en/web/ip-financing