Lending against your IP assets – fact or fiction?

how-to-work-out-the-true-cost-of-borrwingMany businesses recognise that their patents, trade marks and copyrights are hugely significant to the business and that these issues are important Board room topics. A well known brand has enormous pulling power and in today’s consumer lead society, it pays to be associated with the right brands. Technology protected by a proper patent portfolio will deter the competition from copying; and in today’s content driven society, a good website and copyright material can make or break a business. Why is it then that IP is so over looked when it comes to attributing a value to it or lending against it?

Many businesses don’t put a value on their balance sheet for IP for the simple reason that accounting standards don’t allow it unless the IP has been “bought in.” As a result of this historic standard, many SME’s are now choosing to hold their IP in an IP holding company, thereby acquiring the IP in from the trading company, and attributing a proper value to it. This has the added benefit of holding the IP at arm’s length from the uncertain trading conditions of a trading or manufacturing arm of the business. Transferring the IP is a relatively straight forward procedure but care must be taken to:

  1. Obtain a proper valuation of the IP to be transferred.

 

  1. Ensure the IP is legally assigned by a specialist IP lawyer.

 

  1. Ensure the IP is licensed back to the trading company for the purposes of protection from copying, the patent box etc.

One of the main issues at the moment is finding a valuation that is robust enough to withstand scrutiny, without spending a fortune. This is possible with some on-line valuation tools. More complex valuations are also undertaken but are generally only used where there is a damages calculation to be done for the purposes of litigation.

The good news however, is that the UK Government is pressing lenders hard to take account of IP assets in business. This means that some lenders are now seriously looking at lending against IP portfolios. This firm has in the last 2 years undertaken securitisation of a £1.5 million trade mark portfolio and has advised pension funds lending against brand assets. We’re also aware of specialist lenders who will lend to businesses against IP licensing streams. We completely welcome this change of attitude by lenders. In fact as IP is now usually the major contributor to company value in our view it can’t come soon enough.

Elizabeth Ward

Virtuoso Legal www.virtuosolegal.com

Contact liz@virtuosolegal.com or 0113 237 9900 and 0207 406 7490

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