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Security for Patents

Written by Michael Coyle on 07 November 2008

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Patent Security

Your IP is extremely valuable. However as it is an intangible asset difficulties may arise for a lender wishing to take security over your patent. Your patent may be valuable to the borrower but of no value to a potential lender who has no knowledge of the trade or your particular skills within that industry. It follows that a definitive figure may be difficult to determine, so before granting the security interest, any lender should explore how it would exploit the IP if it had to enforce its interest. It is also worth remembering that IP rights may well diminish in value for example patent or designs registrations may lapse if renewal fees are not paid on time. So while the value of your IP may be commercially valuable you must ask yourself if there are amy hidden boy men ready to challenge the value of your security.

A significant factor will be just how separable the IP is from the business. Does it generate an income stream ? For example a successful film or a catalogue of songs is providing an income and can be identifed as such and is separate from the borrower's business. When assessing IP rights it may also be an idea to consider Intellectual Proprty rights as a whole. For example the product will have a trademark, it will claim proprietory rights in the name, logo and packaging. In addition it will have copyright in perhaps the website or promotional materials, perhaps even design right or patents rights. The problem in all these instances is ascertaining the value of the IP in question. Without extensive costings it can be quite difficult to ascertain the value.

The United Nations Commission on International Trade Law (UNCITRAL) published a in 2007 <http://www.uncitral.org/pdf/english/colloquia/2secint/Ad%20Hoc%20Working%20Group%20Report.pdf> which sets out an overview and principles necessary for an effective regime of intellectual property asset financing. Importantly it provided an overview of the different commercial practices for financing intangible intellectual property.

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