The 5th edition of CII’s (Confederation of Indian Industry) flagship annual Intellectual Property (IP) conference focused on creating IP-led technology for a $5 trillion economy has recently released a report showing global examples to represent the virtues of using IP as collateral for financing.
Visualized by CII and co-created by Duff & Phelps, the report said that being the third-largest economy for start-ups in the IP industry, including technology and pharmaceuticals, India is standing at the verge of IP revolution. Although the government initiatives like the release of the National IPR Policy in 2016 to spur interest in Intellectual Property Rights (IPRs) commercialization have been institutionalized, India’s IP financing process is still quite slow.
What are the reasons for the slow pace of IP financing In India? As the report said, unwillingness to treat IP as a business asset, challenges in IP licensing, lack of uniformity in the valuation of IPs, insufficient market, and legal infrastructure to monetize IP assets are some of the main reasons for the slow pace of IP financing in the country.
What is IP-backed financing? IP-backed financing refers to the approach of using IP assets to achieve access to credit. Nowadays, more and more MNCs (Multinational Corporations) and SMEs (Small and Medium Sized Enterprises) are selling their IP assets in exchange for finance. Besides, lending institutions worldwide are considering IP as collateral while extending loans. In general, IP assets are used to secure asset-based loans. However, if collateralized, then they can be used to increase the available credit. Note that in the cases where borrowers guarantee their IP, no matter patents, trademarks, or copyright, as collateral, the collateral pool upsurges in value and potential for a successful loan. In simple words, with ideas and innovations emerging as the key driver of the businesses, financing base that supports the IP’s commercialization is remarkably crucial.
Mr.Arvind Thakur, Chairman, CII National Committee on Intellectual Property & Senior Advisor to the Board, NIIT Technologies, while commenting on the report, said that using IP as collateral will help the industries and banks to develop a good understanding of the subject matter and gain profits.
He continued by saying that according to CII’s belief, IPRs should be at the central stage for competing in the world of Artificial Intelligence (AI) in a meaningful way. Moreover, it is expected that this would open new scopes of financing in India.
Following Mr.Arvind, Aviral Jain, Managing Director Valuation Advisory Services and Co-Head, Restructuring, Duff & Phelps, said that the nation needs to have a mechanism for obtaining financial support and a robust marketplace. India can take lessons from IP friendly nations such as Korea and Singapore that have taken steps to create an IP financing ecosystem. The schemes introduced to flourish the IP sector in these countries benefit SMEs, Start-ups, and even lending institutions.
Other Key Findings of this Recently Launched Report Are As Follows:
- When the regulatory environment is emerging globally, and initiatives to give impetus to IP-based financing are underway, economies like Singapore display a sophisticated regulatory environment and a robust infrastructure for IP financing.
- Over the past five years, IP financing transactions in areas where IP is used as collateral have declined globally.
- There’s an increase in global PE (private equity) funds that are not just investing in IP-based companies but also helping to protect IP in certain situations. For more visit: https://www.trademarkmaldives.com
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