Legal Aspects of IP Securitization

Securitization of an IP is unlike securitization of other forms of conventional assets like credit cards and mortgages.?This is because IPRs are a category of personal property that can be purchased, leased, registered, or exchanged in the same manner as any other type of?property.[1]??The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI Act) governs IP rights in court.?This act clarifies that the term "property" encompasses intangible assets and describes "security interest" as a legal right.

In the last decade, at least nine foreign investment arbitration cases involving IPR have been launched.?If intellectual property can't be isolated from the company's core operation, it's useless as a security, and it's hard to analyze in that situation.?There is also a lot of confusion about how to value intellectual property correctly.?The divisibility of intellectual property, the intangible value of IP properties, and the small number of intellectual property business transactions are all major?issues.[2]

Authorities face many problems when it comes to the securitization of intellectual property.?To begin with, there are certain contradictions in the laws in force. In other words, intellectual property can be regulated by either intellectual property or protected transaction rules.?Furthermore, they are ruled by both in some places, which causes some confusion between the two governance systems.?Second, security rights must be recognized, and some countries do not recognize security rights for IP properties such as databases, trade secrets and so on.

Finally, there is a restriction on the transferability of IP, meaning such legal provisions restrict a licensor’s, an owner's, or a licensee's ability to establish a security interest in such categories of intellectual property.?Intellectual property has the power to be limitless. In fact, intellectual property rights are only limited by the ability to repel challenges.?The central method or remedy for this is the policing and enforcement of IP rights duplication, use, and misuse in a community so that delineation can be done in the interest of the?business.[3]

Since IP securitization captures extra value, it appears to be an appropriate way to make money on goods or services in terms of supporting or financing businesses.?Previously, IP privileges were only available as a way of increasing the borrower's goodwill, not as a form of protection.?Despite its economic worth, intellectual property has recently become a popular form of leverage in secured transactions.?Therefore, Intellectual Property Rights must be legally protected. Furthermore, one should be able to differentiate IP from the borrower's company and value it appropriately to be used as collateral for corporate debt.

Since intellectual property cannot be viewed by the naked eye, legitimate rights of security in IP must be registered.?As previously stated, intellectual property valuation is plagued by competing valuation approaches, separability issues, and a limited number of commercial transactions.?The fourth challenge that authorities face is an accounting issue, but accountants should be aware that the process and efficacy of valuation can influence lenders' ability to accept intellectual property as collateral.

As the term implies, intellectual property rights cover rights to opinions, concepts, and knowledge, as well as new technologies and processes.?The declared goal of such a right is to fuel industrial innovation and productivity by delivering higher market returns.?Security and preservation of those rights have become increasingly important issues for IP holders as a result of recent?trends in?globalization.?Of course, the?protection of emerging technology is no longer restricted to developed countries.?All WTO and TRIPs signatory countries are required to secure a number of intellectual property rights.?As a result, securitization of IP rights is the perfect option for everyone's protection.?And this leads us to a very important topic regarding the role of governments everywhere in supporting and promoting the securitization of intellectual property (IP).

From the book “Intellectual Property Securitization” by Marc René Deschenaux

Available at https://swissfinanciers.com/intellectual-property-securitization-2nd-edition/

[1]?(Tosato)

[2]?(Rosenberg and Weiss)

[3]?(Haynes)