Officials from two lawyerly United Nations agencies met recently to discuss their roles in intellectual property finance, especially in light of the global economic crisis.

The World Intellectual Property Organization hosted a one-day information meeting on IP financing on 10 March, attended by officials working on the issue at the UN Commission on International Trade Law (UNCITRAL). The officials followed with a bilateral discussion the next day, according to sources.

WIPO has participated for five years in UNCITRAL’s work on the issue, particularly developing a legislative guide on secured transactions and an annex to that guide on security interests in intellectual property (IPW, WIPO, 30 May 2009).

The connection between financial securities and the underlying economic value has “become too tenuous,” WIPO Director General Francis Gurry told the meeting, making it difficult to be certain that the valuation system is in place and understood. Securities also have become more complex in recent years, lacking transparency which in the current economic climate adds to distrust.

Nevertheless, “the intangible economy has arrived,” Gurry said, with more than 50 percent of the top companies in the credit rating agency Standard and Poor’s index dependent on intangible assets. Global trade in intellectual property is valued at more than $300 billion, he added.

IP assets will not realise value without adequate legal support and awareness of intellectual property in the financial sector, Gurry said, and capacity is needed in the IP industries.

The aim of the meeting was to raise awareness of IP financing issues, Gurry said. WIPO will publish an “information paper” after the meeting, which will include an annex with the results of a recent questionnaire on IP finance practices sent to member states, to which 57 replied – about half from developing countries.

WIPO Deputy Director General Michael Keplinger said afterward that following the information meeting, officials from the copyright, patent and trademark sectors at WIPO met informally with a member of the UNCITRAL secretariat, “as part of a regular ongoing exchange of information and cooperation in the field of IP financing.”

Member states will have to decide future activities in this field by both organisations, Keplinger said. Subject to member states’ demand, “it is proposed that WIPO continue its work related to the commercial management of IP assets, including IP financing, in various sectors of the organisation,” he said.

WIPO’s activities “currently address issues relating to IP valuation, raising awareness among member states and the broader IP community of the opportunities and challenges of IP financing, information and assistance for SMEs [small and medium-sized enterprises] on IP asset management – in the context of the [WIPO] Development Agenda – as well as cooperation with UNCITRAL in its ongoing work on security interests in IP.”

An UNCITRAL official told Intellectual Property Watch that the information meeting might have been like a “brainstorming session.”

UNCITRAL has been working on an IP annex to its Legislative Guide on Secured Transactions. Neil Cohen, law professor at Brooklyn Law School in New York, outlined the legislative guide.

Spiros Bazinas, senior legal officer at the UNCITRAL secretariat, speaking on his own behalf, told the meeting that UNCITRAL’s work is aimed at facilitating IP financing within the bounds of IP law, in order to help creators use their rights for credit and secured creditors to obtain a security interest in an IP right.

The next UNCITRAL working group meeting is planned for 27 April to 1 May in New York. The hope is to take the draft annex to the full UNCITRAL commission meeting in June 2010, with more meetings leading up to it. Bazinas said he has no fear of duplication of work by WIPO.

Speaker presentations from the WIPO finance event are available here.

Country Case Studies

Participants from 78 countries registered for the event, WIPO said.

During the day case studies from various regions were presented, such as Brazil, Israel, Malaysia and Scotland, and presenters described varying degrees of awareness in their public and finance sectors of the value and role of intellectual property assets.

Jern Ern Chuah, chief executive officer of Advanz Fidelis in Kuala Lumpur, said Malaysia has become aware of IP assets but is struggling to bring acceptance to the private sector.

“IP financing in Malaysia is very much in its infancy,” Chuah said, noting that the dominant source of lending in the country remains family and friends, and banks strongly prefer landed properties to illiquid assets.

The government launched a national IP policy in 2007 with a significant investment aimed at capturing IP to drive economic growth and helping transform the economy to knowledge-based.

Trademarks represent the largest form of registered of intellectual property in Malaysia, five times more than patents or industrial design. Local ownership of IP is far less than foreign ownership, but “we expect this to change,” Chuah said.

The government is working to overcome distrust of IP rights as assets, offering easy-to-obtain grants for IP filing. They expected a “flood of interest” but instead met with suspicion from would-be grantees who doubted something being given away for free. The government says it is a benefit to the overall economy and the nation.

A “final blow” to the government effort to promote IP rights as assets is that those with registered IP previously have been able to find financing abroad, but now the global economic crisis has dried up that source as well. Still, Chuah said “Malaysia does expect a rise in IP financing in the future.”

Renee Ben-Israel, vice president for intellectual property for Yissum Technology Transfer at Hebrew University in Jerusalem, called the patenting of technologies an “awkward side-product of what universities do.” University patents are part of the research stage in the technology transfer process that leads to commercially successfully products, she said. The school makes money from licensing its patents to the private sector.

A university strategy is to use IP protection as “an incentive to make high-risk investment, motivating the ‘first mover’ by protecting against later competitors,” she said.

Ben-Israel used much of her presentation to tout the advantages and successes of Israel and her university. She took a shot at patent “trolls,” who register patents for profit despite being non-manufacturers.

Another speaker was Iain Shirlaw, director of Active Investment Partners in Beith, Scotland, who set up the company that supported the research leading to Dolly the sheep, the world’s first cloned animal. He also touted his country’s long prowess in medical innovation and now biotechnology, and described a “long, hard road with enormous challenges” for bringing ideas to commercial fruition.

Research in Scotland in recent years has been driven by universities experimenting with IP rights and technology transfer and negotiating with companies that can oversee spinoffs and value generation. He said the model might change in the current economic climate, but that the sector is well-developed and savvy. He also said that funders look to fund not only IP and ideas, but the people themselves.

Helena Tenorio Veiga de Almeida, head of the programme design and operational policies department at Brazilian state-owned development bank BNDES, talked about the bank’s efforts to promote innovation, including lines of credit, equity, a special credit card, and non-reimbursable funds, and valuation of intangible capital. Brazil is hampered by high interest rates on lending.

Megan Deane, deputy managing director at the Ex-Im Bank in Kingston, Jamaica, also described her institution’s movement toward backing IP-related activities. As the bank is relatively unfamiliar with IP as an asset, it has a risk capital pool against which it will put its IP lending.

A Korean official in the audience proposed that WIPO develop methodology for evaluating IP.

Ronald Crawford, IP and brand protection manager for Arsenal Football Club in London, said the popular team works to find the “middle ground” on enforcement of IP rights “so we don’t quell the fan support and even anger them” while protecting against misuse of its brand.

Leianne Crittendon, vice president, chief counsel of the financing division at US software maker Oracle, said the company provides alternative payment terms for customers to acquire Oracle products and services. She said Oracle would like laws to provide clear rights and obligations on software payments so it does not have to work out concessions on a case-by-case basis. Current commercial, insolvency and intellectual property laws are “inconsistent,” she said. She provided details of transaction structures for financing contracts, and described IP assets as different than tangible goods and always subject to the licence terms.

The future will tell the degree to which the financial market for intellectual property assets takes off, and the role the United Nations played in that process.