In response to Aritra’s Chaterjee’s excellent guest post on the use of intangible assets as loan collateral, I would like to add the following U.S. perspective.
Those of us that have been looking at IP collateralisation over the past several years recognize that valuation challenges are at the heart of the “problem". However, it is of critical importance to recognize that the valuation uncertainty varies considerably with the type of IP under consideration. More specifically, the risk profile impacting liquidation value uncertainty in the event of default differs materially depending on the type of IP involved. Most of the IP-backed finance that occurred from 1995 to 2005 involved “brands" (trademark IP) and “content” such as music and film (copyright IP) which carry much less legal risk — in terms of validity, scope of rights, and infringement — than do patents. This is even more true today in light of
What patents are all about?
(2) the new America Invents Act-based administrative procedures for challenging the validity of issued patents in the USPTO;
(3) the practical unavailability of injunctive relief for patent infringement after eBay; and
(4) the rapidly changing Federal Circuit and District Court case law affecting the calculation of reasonable royalty damages for patent infringement, the net effect of which is to lower the expected return from enforcing patent rights in court.Thanks, Ron!
Bottom line: in this area as in others, one should be careful in talking about “IP” as if it were a homogeneous class of rights.