Professor Nimmer on Revised Article 9 and IP Financing

Professor Raymond T. Nimmer of the University of Houston Law Center, a leader in intellectual property law in the United States, sadly passed away in January of 2018.  Before passing, he authored, “Revised Article 9 and Intellectual Property Asset Financing.”  The abstract states:

Commercial asset value today often resides primarily in information assets, rather than in the physical assets that dominated the industrial age (goods and real estate). While tangible assets continue to have value, of course, the shift toward intangibles as value is significant and has been occurring for some time. We have not yet seen its end. More important, we have not yet come to grips with its meaning, either for commercial contract law or for commercial asset-based financing. Attitudes and approaches from the commercial world before intangible assets took center stage continue to influence how modern law treats information assets. Intangible assets take a variety of forms. Some involve contract rights to receive payment from third parties. This type of intangible property has provided a basis for commercial financing arrangements for several generations. But, in the modern economy, sources of intangible asset value go beyond contracts. Information has value. Rights to use or to prevent others' use of information have value. These values do not depend on a contract right to payment. Rather, the value depends on both the situational value of the information itself (e.g., how important is it in light of other sources of similar or the same information) and on a statutory or contractual right to use or to exclude others' use of the information. It is in dealing with this type of asset that modern commercial asset financing law must be judged because it is here that the major share of economic growth in this country will continue to focus. My purpose in this Article is to explore the relationship between information assets and commercial asset-based financing under proposed revisions of U.C.C. Article 9. This relationship entails a structural and philosophical conflict that engenders uncertainty at various levels. Revised Article 9 represents a massive and largely successful effort to solve many previously uncertain issues in asset-based financing. In information financing, however, many questions are left unanswered or the answers are structured in a manner that exacerbates conflict. We have not reached an effective accommodation between information property rights law and state law of secured financing under Article 9.

A tribute to Professor Nimmer may be found, here. 

WIPO makes 10 March IP money day

Good news has just reached this weblog from Geneva, where a World Intellectual Property Organization (WIPO) press release announces that WIPO is convening a meeting to explore the use of intellectual property as a financing tool.  The text, in relevant part, reads as follows: 

"The use of intellectual property (IP) assets to raise finance – “IP financing” – will be the subject of an information meeting organized by the World Intellectual Property Organization at its Geneva headquarters on March 10, 2009.  

The ability to use IP assets – copyright, patents, trademarks, designs – as collateral, particularly for small and medium-sized enterprises which depend on know-how and IP assets to bolster company value, is of growing importance. Using untapped intangible assets to secure finance is all the more crucial for companies in the current economic environment. 

Global commerce in IP assets has expanded in recent years across a range of industries. Intangible assets are estimated to account for the bulk of corporate value today. However, the financial potential of IP assets has yet to be fully realized, largely because systems of financial accounting remain primarily tailored to tangible assets. The continued growth and success of IP financing hinges on legal and regulatory support, the awareness of the banking industry and sophistication of capital markets. Unleashing the full potential of IP financing offers an opportunity to boost business growth, innovation and creativity. [in the past few months the banking industry has given the IP sector little hope that it sees IP as anything other than a commodity that can be bought, sold and licensed, with little clue as to what, for example, the effect of interposing a royalty-collecting bank creditor between a sublicensee and a licensee might have upon the business plans and the expected cash flow of the licensor. IP owners must wise up, or pack up]

The information meeting aims to raise awareness within the intellectual property community, including creators and rightholders, as well as the wider financial services community, of the opportunities and challenges of IP financing. It will examine current practices in different countries and different industries, including in the copyright, patent and trademark fields. The meeting will highlight the ways in which improvements in law and financing practices may assist right holders in maximizing the value of their IP assets. 

The meeting is open to the public and is free. Anyone interested in attending the meeting is requested to complete the on-line registration form.  [If anyone is attending and can take notes that can be posted on this blog, can they please email me here and tell me] 

Background

WIPO is cooperating with the United Nations Commission on International Trade Law (UNCITRAL) [at last -- thank goodness!] to ensure that the views of the IP community are taken into consideration in policy development on the issue  [some readers will remember that it was the panic and uncertainty injected into IP owners' lives by the UNCITRAL draft guidelines on secured transactions that precipitated the birth of this blog in the first place]. 

 WIPO manages a number of innovative projects to assist member states, and the IP community at large, with the commercial management of IP assets. The Organization has participated over the last five years in the deliberations at UNCITRAL in developing a Legislative Guide on Secured Transactions, [Is this really so? Repeated searches of the WIPO website during the past year, and my own personal experience, led me to fear that WIPO had simply missed this issue completely.  Can anyone verify and give details?] aimed at assisting states to modernize their secured transactions laws and enable more effective access to finance. The Guide was finalized in December 2007, and WIPO continues to participate in UNCITRAL’s drafting of an Annex to the Guide on security interests in intellectual property. 

In addition, WIPO has numerous programs aimed at raising awareness among small and medium-sized enterprises of the use of intangible assets, including IP, in accessing finance [to its credit WIPO also dedicated a large chunk of the September 2008 issue of its greatly-improved magazine to publishing a range of easy-to-read features on the subject]. The topical issue of IP valuation is also the subject of ongoing research and training programs, geared towards a better understanding of IP as an emerging asset class". 

I both hope and suspect that one meeting of this nature will be insufficient.  The financial needs and cash flows of, for example, the film industry, pharmaceuticals, telecoms and software applications are so totally different: it would be great if sectorial follow-up meetings could be organised. This can be one of WIPO's next tasks.