Intellectual Property Securitization (eBook)

Intellectual Property Securities

Marc Rene Deschenaux (Autor)

eBook Download: EPUB

2021 | 1. Auflage
302 Seiten
Bookbaby (Verlag)
978-1-7364515-8-8 (ISBN)

Infos

Imagine the possibility of investing selectively in one aspect of a company, such as a single movie, song, book, patent, technology, or design you truly believe in. Picture the separation of the investment from the corporation and its human errors, like poor management or excessive spending. 'Intellectual Property Securitization' introduces author Marc René Deschenaux's creation of Intellectual Property Securities (IPSs). Not only does an IPS allow you to invest selectively in one project, but it accomplishes this without diluting equity or adding debt to the balance sheet of the issuer, whether a physical person or a company. Intellectual property (IP) as a commodity is becoming increasingly important in today's global economy. Dive into the world of securitization and intellectual property rights. This book provides invaluable information on the risks, advantages, and legal aspects of the securitization process as a whole, pointing to specific features of IPS.

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Imagine the possibility of investing selectively in one aspect of a company, such as a single movie, song, book, patent, technology, or design you truly believe in. Picture the separation of the investment from the corporation and its human errors, like poor management or excessive spending. "e;Intellectual Property Securitization"e; introduces author Marc Ren Deschenaux's creation of Intellectual Property Securities (IPSs). Not only does an IPS allow you to invest selectively in one project, but it accomplishes this without diluting equity or adding debt to the balance sheet of the issuer, whether a physical person or a company. Intellectual property (IP) as a commodity is becoming increasingly important in today's global economy. Dive into the world of securitization and intellectual property rights. This book provides invaluable information on the risks, advantages, and legal aspects of the securitization process as a whole, pointing to specific features of IPS. IPSs reduce the costs of transfer of intellectual property to a fraction of their regular costs. They ensure that if you transfer a certain technology, all patents, trademarks, and other relevant intellectual properties thereto pertaining are included in said transfer. Finally, under many jurisdictions, IPSs allow the investor to invest directly into science through patents or into arts through copyrights, authoring, and neighboring rights; because of this, investment is tax free!All books are also available in audiobook format.

Textauszug

Introduction

Companies with little to no tangible assets can raise substantial funds without giving up a sizeable percentage of their ownership in the entity.

How is that possible? It is possible through the sale of security interests in intangible assets like intellectual property, which includes copyrights, trademarks, and patents.

Intellectual property (IP) as a commodity is becoming increasingly important in today’s global economy.

While a corporation’s tangible assets are vital, the level of return it receives from its intangible assets is worthy of praise.

Several types of intellectual property exist, among which: trademarks, copyrights, and patents. IP protects the majority of hi-tech gadgets, technologies, and symbols.

Since it is an intangible asset, no one, not even the most knowledgeable people, can accurately predict the value that this intangible asset would generate.

Although intellectual property is not a tangible commodity in the conventional sense, it is an asset, and as such, companies can get financing by using it as collateral.

The method of transforming an asset or a pipeline of cash flows into marketable shares, referred to as asset securitization, is well-known in the financial industry but is a novelty when it comes to intellectual property.

To understand IP securitization, it is important to grasp the concept of securitization first.

What is Securitization?

There is a lot of confusion about the definition of securitization.

Fundamentally, Securitization is the process by which a right is integrated to a support so that said right can automatically be transferred of ownership and/or benefit and/or possession by the assignment of said support to a new holder.

Up to now, recently, securitization was used only as collateral to back interest bearing securities.

A report published by the International Monetary Fund (IMF) describes securitization as follows:

“Securitization is the process in which certain types of assets are pooled so that they can be repackaged into interest-bearing securities. The interest and principal payments from the assets are passed through to the purchasers of the securities1.”

Securitization is the mechanism that an asset’s owner (originator) uses to offer the asset to a special purpose vehicle/entity (SPV) created solely for this reason.

The SPV then produces marketable securities secured by these assets and sells them to financial market participants as asset-backed securities (ABS).

The revenues from the buyers’ purchases of the ABS are utilized by SPV to compensate the originator.

As a result, an illiquid commodity of the originator is turned into a marketable security via securitization.

The primary goal of securitization is to improve liquidity in the market against illiquid assets.

Securities that are backed by assets are formed with the help of securitization.

Only tangible or real assets such as property or land, as well as cars, were previously used to back these securities. However, today IP assets are also used to back securities.

Please note that using an asset as backing a securities issue is not directly securitizing the asset, but securitizing a secured debt

What is Intellectual Property (IP) Securitization?

IP assets are often used for financing purposes by their owners. Such IPs may also be securitized when they have the potential for future receivables, such as possible royalty payments.

Securitization of IP assets follows a mechanism that is similar to the securitization of every other asset or asset-backed security2.

First, there is an asset owner (originator) who is ready to invest in businesses in order to gain future revenue source rights based on the corporation’s intellectual property asset.

Future sources of revenue could include sales of goods that are covered by one of the definitions of intellectual property law, as well as royalties earned by selling, licensing or pledging intellectual property rights.

In the context of patents and copyrights, income may come from licensing any form of security or from selling the underlying assets that the intellectual property protects.

The originator would generate and then transfer the rights to potential cash flows from the underlying properties to a securities issue through direct securitization or to an entity such as a special purpose fund in the case of indirect securitization. Indirect securitization is much like every other form of asset-backed security.

After that, the special purpose fund would issue securities that are backed by future income sources.

Common people would invest in the securities generated, enabling the special purpose fund and/or the originator to recover their investment and earn a profit or not depending on valuation.

The income sources received from the underlying security would then be used to pay the people who invested in the securities.

The special purpose vehicle, in this dynamic arrangement, requires a servicer who can receive money from the revenue source and deposit it into the special purpose vehicle.

Furthermore, the servicer is responsible for covering the initial costs associated with operating the special purpose fund as well as the securities issued.

Usually, the servicer would deduct these expenses from the income stream produced by the underlying properties.

The cost of having the securities rated by a credit firm is one of the charges that the servicer would deduct.

Credit ratings for intellectual property-backed securities are often needed so that ordinary people with limited knowledge of IP securities can recognize the risk factors associated with the security when determining whether or not to invest in it.

A credit rating firm cannot measure intellectual property-backed assets in the same way as other assets and must devise a unique approach to rate them accurately.

For instance, when rating intellectual property-backed securities, Moody’s Investor Service considers how the technical market is evolving in relation to the assets in the pool, how rapidly the technology will become outdated, what brands are included in the portfolio, and so on.

This demonstrates how credit rating agencies must understand not just the pool of assets but also the changing world around them.

Why Intellectual Property Securitization is the Future of Securitization?

Asset securitization began in the early 1980s with the securitization of credit card receivables and auto loans. It has since expanded to include a wide variety of assets, ranging from auto loans to restaurant sales.

As companies' emphasis begins to shift toward creating intellectual property, obtaining financing via intellectual property would become much more common in the future.

There are many arguments in favor of using intellectual property as collateral. However, the most important reasons for securitizing them are:

• Intellectual property is an underutilized collateral source.

• Securitization of IP provides a quick return on investment in R&D; and

• Securitization of intellectual property generates added value

The following is an explanation of these reasons for securitizing intellectual property (IP).

Intellectual Property is an Underutilized Collateral Source

According to a number of reports, the role and impact of intellectual property is growing in the US and global economy.

For instance, the value of intangible assets as a proportion of US company market capitalization rose from 20 percent in 1978 to 73 percent in 1998, showing that the proportion of intangible assets to tangible assets of US firms has gradually increased over time3.

Therefore, a corporation that primarily uses tangible assets for asset-backed funding has a significantly lower asset base than one that uses intangible assets such as IP in the form of trademarks, patents, and other forms of intellectual property.

Companies are able to access new streams of financing, and at better rates, by having those additional assets as security.

Securitization of IP Provides a Quick Return on Investment in R&D

In industries with few tangible properties, the opportunity to convert R&D innovations into assets such as copyrights, trademarks, and patents that can be presented as collateral to lenders is critical.

Major technology firms spend billions in research and development (‘R&D') expenses per patent awarded each...

Produkt-Details

• Erscheint lt. Verlag: 25.8.2021
• Sprache: englisch
• Themenwelt: Recht / Steuern
• ISBN-10: 1-7364515-8-8 / 1736451588
• ISBN-13: 978-1-7364515-8-8 / 9781736451588