July 21, 2022
Whether scaling up or expanding, businesses need access to capital. But securing financing remains challenging for many firms. For companies whose primary value stems from what they invent and create, as opposed to hard assets, traditional avenues of finance may seem unattainable. This finance gap creates an obstacle for many companies. Strategic use of intangibles as support for finance could narrow the divide and become a game changer for these firms. Their intangibles, especially those protected with intellectual property (IP) rights, like copyright, industrial designs, trademarks, and patents, can be used to support lending and investment.
Governments and businesses are experimenting with ways to improve the financing outlook for intangible intensive companies. To track and learn from these experiences, WIPO launched a new report series on Unlocking IP-backed Financing: Country Perspectives. At a side event held during the Sixty-Third Series of Meetings of the Assemblies of the Member States of WIPO, five countries participating in the project shared their perspectives from on the ground.
A common theme emerged from the discussion by representatives from Jamaica, Japan, Singapore, Switzerland, and the United Kingdom. Making progress in intangible asset finance requires engagement across sectors, like finance, business, and government, to work together. Ms. Lilyclaire Bellamy, Executive Director of the Jamaica Intellectual Property Office (JIPO), emphasized: “What we have done is that we have taken a holistic approach.” when she explained about how JIPO has successfully involved various stakeholders, such as its central bank, development banks and commercial lenders in its campaign to facilitate IP-backed Financing for SMEs. Each set of actors comes with a different mindset towards intellectual property, and how it contributes to a company’s value. Which is why the approaches countries have taken in this area reflect a myriad of responses and are often tailor-made to the local context. These include measures like guarantees and subsidies, the creation of dedicated funds, and engagement in standard setting organizations. In Japan, the Japanese Patent Office focused on developing tools to help businesses communicate the value of their intangible assets. According to Koji Tauchi, Director of the Japan Office’s Multilateral Policy Office, “We strongly encourage financial institutions to also focus on IP as a powerful tool when evaluating business activities.”
Building a common framework and skills around valuing intangibles was another topic where the panel focused. Several countries are working with their valuation community to increase awareness around the nuances of intellectual property and develop a more standardized approach. In some countries, this professional community needs to be built from scratch. This includes working with standard setting bodies, some of which are also in the process of further developing their guidance on how companies disclosure their intangible assets. “We see intangible asset financing and valuation as promising area. It is a very exciting space we are in.” pointed out Dr. Bernard Ong, Group Director, Policy and Engagement Cluster, Intellectual Property Office of Singapore. However, in a purpose-driven strategy, intangible asset finance serves primarily as a means to an end. “At the heart of what we are trying to do is basically to help innovative companies.”
“IP-intensive business should be able to use their IP as an asset to gain access to the right type of funding at the right time so they can grow.” highlighted Mr. Adam Williams, Director of International Policy, UK Intellectual Property Office. Many already use their intangible assets to secure equity finance. Mr. Hansueli Stamm, Chief Economist of the Swiss Federal Institute of Intellectual Property shared that patents in particular play an important in Switzerland. He explained that they “are often used to signal significant substance in the enterprise, mostly with startups in the field of life science, pharma, medtech, ICT and cleantech.” On the side of debt finance, the role intangible assets play may not be obvious. As Mr. Matúš Medvec, President of the Industrial Property Office of the Slovak Republic commented, “If you take into account that 90% of the value of the companies are intangible assets, then you come to the conclusion that banks are already financing IP.”
While securing capital on the strength of intangible assets holds tremendous potential for businesses, panelists also pointed out that this area of finance faces a number of challenges. It will need action by a diverse set of stakeholders to bring it to the mainstream. To accelerate on the path forward, WIPO will hold a high level conversation on intangible asset finance on November 1, 2022. The event will be a dialogue between senior leadership in the fields of finance, business, and intellectual property from the public and private sectors. The Conversation aims to raise awareness amongst the global community in this space and showcase its potential. The Conversation will also include accounts from the field to describe what is currently working and where the ecosystem still has unfulfilled prospects.