IP Outreach Research > IP Use and Awareness
|Title:||Financing of Welsh SMEs & the Commodification of IP Rights|
|Author:||Iwan R Davies [University of Swansea/IP Wales]|
|Subject/Type:||IP Knowledge, IP Protection|
|Focus:||Commercialisation, Economic / Financial Impact|
|Objective:||To ascertain the experience of small and medium businesses (SMEs) and professionals with regard to the use of intellectual property (IP) as security for finance with specific reference to technology-based SMEs in Wales.|
|Sample:||301 Welsh small and medium-sized enterprises, 27 legal practitioners and 19 accountants|
58% of small and medium-sized businesses (SMEs) reported ownership of intellectual property (IP). Of those owning IP rights, 62% retained trademarks, 57% copyrights, 51% patents, and 26% design rights. When asked about the value of their IP assets, 57% gave a quantitative value, 16% a qualitative value, and 25% reported that the value of the assets was unknown. Just 9% of SMEs had a formal IP valuation mechanism in place (89% did not).
A majority of respondents (60%) judged the economic impact of IP on their business as positive in terms of staff employed as a result of IP assets. Almost three in four respondents (73%) felt that IP could have a positive influence upon a financier’s decision to lend money to a business. However, just 54% believed that IP rights would have a positive effect on a financier’s decision to give improved lending terms.
75% of SMEs surveyed reported never having been required to give up equity in their business to obtain finance (24% had had to). 60% had never considered diluting ownership to obtain a capital injection (40% had done so). Businesses owning IP assets were found to be more likely to dilute ownership in order to get capital.
60% of IP owning businesses would consider using their IP assets as collateral for debt finance. However, 90% had not used their IP as security. The most important IP collaterals of those who had done so were patents, portfolios of patents and combinations of IP assets. Reasons given for not using IP to raise finance included “has not been necessary” (33%), “never considered the possibility (9%), and “no value associated with the IP assets” (8%).
Lawyers reported that the most frequently used instruments for perfecting security instruments in IP were the assignment of IP rights and the charge. One in five lawyers surveyed indicated having been engaged in securitisation based on IP assets.
Accountants and lawyers specified that the “recreation & other services” (40%), business services (22%), the manufacturing (17%) and the health sectors (15%) were most likely to offer their IP assets as collateral for debt financing. 70% of them reported that SMEs were the most likely companies to offer IP as security.
Slightly over half of the accountants/lawyers purported to have sought to value an IP asset. 83% of those who had sought to value IP had sought the advice of an expert. The most popular valuation mechanisms were an “ad hoc approach” (71%) and a “set of criteria” (58%). Almost three quarters (71%) felt that their valuation method was “subjective”. 87% reported having experienced difficulties with the valuation process.
When asked what IP asset would be the easiest to take as collateral, patents came in first (63%), followed by “there is no difference” (25%), copyright (8%) and trademarks (4%). Almost two thirds of accountants and lawyers considered that the sector of the company had an impact upon the value of its IP assets. 96% felt that a licensing deal was important to the valuation of an IP asset. 54% believed that there were enforcement problems that may affect the value of intellectual property rights.
[Date Added: Nov 20, 2008 ]