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 enterprises (SMEs) in developing countries
According to the newly released manual from the World Intellectual Property Organization (WIPO), rights as registered trademarks, patents, industrial designs and copyright with economic exploitation, including software, can be used to guarantee financial operations
This approach is especially advantageous for technology-focused SMEs, design and media, that often lack tangible assets, but have valuable intellectual rights, according toLuiz Fernando Plastino, lawyer of Barcellos Tucunduva Advogados, specialist in Intellectual Property and 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 copyright usage at least since the end of the last century. In the countries of Continental Europe, we have discussions about copyright and trademarks used in guarantees since the 19th century. In Brazil, we have seen brands used as judicial guarantees, but it is still not common to see these rights used in financing, explain
Many times SMEs, especially those focused on technology, design or media production, do not have their own tangible assets to secure a loan, for example, but they have valuable intellectual rights and can use this value to obtain funding, if the financial institution is willing and prepared to accept them. Several companies, even financial institutions, they do not even know that it is possible to structure this type of operation, because it is not something very studied and we still do not have much case law on the subject, says Plastino
In the doctoral thesis defended at the Law School of USP, titled "Author's patrimonial right as movable property: impact on guarantee rights", Plastino raises the issue that companies would have a lot to gain from this practice. "these companies can discover a treasure by valuing their intellectual assets", that is made in various ways than what is normally practiced with material assets, such as real estate or equipment
The new WIPO manual brings various models, that range from the assignment of intellectual property and back licensing and the establishment of guarantees over the right itself to direct investment and the securitization of royalty payments. "The previous material from WIPO used to focus on this last format", that became famous for being the model inaugurated by David Bowie to finance his releases in the 1990s, remembers
For the specialist, it is important to emphasize that the WIPO manual analyzes the problem from a negotiation perspective and without asserting the rights of any country. "My doctoral research focused on how these structures should take legal form in Brazil", thinking mainly about copyright and software rights. It is important for us 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
