Written by: Caleb Gilliam-Scott
A joint effort between the UK Intellectual Property Office (UKIPO) and the World Intellectual Property Organization (WIPO) has emphasized the importance of IP-backed financing in a recent report.
The UK is currently experiencing a notable evolution in financing options, particularly for businesses possessing intangible assets such as intellectual property rights (IPRs). The introduction of IP-backed loan products by major financial institutions like NatWest and HSBC UK signals a growing trend in leveraging IP assets to stimulate business growth, which aligns with existing research indicating that firms with registered IP often pose less risk for lending.
Despite the favorable conditions for IP-backed finance in the UK, the report acknowledges several obstacles hindering its mainstream adoption. These include low awareness among financiers and industries, absence of secondary markets for IP assets, challenges in IP valuation, and limited visibility of IP in business reporting. The report contrasts that serial angel investors typically understand the importance of IPRs and may expect to see an IP strategy in place before investing.
One measure supported by the UKIPO to address IP unfamiliarity is an IP audit scheme to provide eligible high-growth potential SMEs with a professional audit of their IP assets and tailored report on how to develop an effective IP management strategy. Past evaluations of the audit scheme have noted that 23% of participants reported subsequent equity investment and 30% received grant funding.
However, it should be noted that IP-backed financing is not exclusively patent-centric, and increasingly copyright in software or database rights are intangible assets which may add value to a business and be leveraged for IP-backed financing. Further, it can be difficult to fairly, uniformly, and reproducibly assess the collateral value of a patent, and as such patents may not be receiving a fair market value for use as collateral in comparison to the bare costs in obtaining the patent and the resultant monopoly rights.
Overall, these developments signal a promising trajectory for IP-backed financing in the UK, with banks increasingly recognizing the value of IP assets and concerted efforts underway to address existing challenges and promote wider adoption. This shift not only unlocks opportunities for businesses to leverage their IP for growth but also underscores the evolving role of IP offices in fostering innovation ecosystems.
Read the UKIPO press release accompanying the report.
