The use of intellectual property (IP) assets as collateral for business financing is a potential innovative solution to expand access to credit, especially for small and medium-sized enterprises (SMEs) in developing countries.
According to the recently released manual of the World Intellectual Property Organization (WIPO), rights such as trademarks, patents, industrial designs and copyrights with economic exploitation, including software, can be used to guarantee financial transactions.
This approach is especially advantageous for technology, design and media-focused SMEs, which often lack tangible assets but possess valuable intellectual rights, according toLuiz Fernando Plastino, lawyer at Barcellos Tucunduva Advogados, specialist in Intellectual Property and PhD in Civil Law from USP.
“However, in theory, any intellectual property right that is tradable can be used to secure financing. In countries like the United States, we have a history of using copyrights since at least the end of the last century. In Continental European countries, we have had discussions about copyrights and trademarks used as collateral since the 19th century. In Brazil, we have seen trademarks used as legal 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 their own tangible assets to secure a loan, for example, but possess valuable intellectual rights and can leverage this value to obtain financing if the financial institution is willing and prepared to accept them. "Several companies, even financial institutions, do not know that it is even possible to structure this type of operation, because it is not something well studied and we still do not have much jurisprudence on the subject," says Plastino.
In the doctoral thesis defended at the Faculty of Law of USP, titled "Author's Property Rights as Movable Property: Repercussions on Guarantee Rights," Plastino raises the question that companies would have much to gain from this practice. "these companies can discover a treasure by valuing their intellectual assets, which is done in ways different from the usual practices with tangible assets, such as real estate or equipment."
The new WIPO manual presents various models, ranging from intellectual property assignment and back licensing, to the establishment of guarantees on the rights themselves, as well as direct investment and securitization of royalty income. "The previous material of OMPI used to focus on this last format, which became famous for being the model inaugurated by David Bowie to finance his releases in the 1990s," he recalls.
For the specialist, it is important to emphasize that the WIPO manual analyzes the problem from a negotiation perspective and without taking a stance on any country's rights. "My doctoral research focused on how these structures should take legal form in Brazil, mainly considering copyright and software rights. It is important to know how to carry out these activities so that neither party is left in the lurch," defends Plastino.
The WIPO handbook (“Hands-on IP Finance: Securing Loans with Your IP Assets”) is available on its business finance page:https://www.wipo.int/en/web/ip-financing
