The Intellectual Property Office of Singapore (IPOS) recently approved the first loan application using a patent as collateral under the IP Financing Scheme (IPFS).
Effective from July 1, corporations can apply with trade marks and copyright in addition to patents, said Director of IP ValueLab Michelle Tan, who oversees IPFS.
The first successful loan was applied by Masai Group International, a shoe manufacturer, and was supported by DBS Bank, one of the participating financial institutions (PFIs).
Lately, IPOS has appointed AFC Merchant Bank as the fourth PFI and expanded the panel of IP valuers from three to seven, adding Baker & McKenzie.Wong & Leow, Ernst & Young Solutions, KPMG and PwC to the existing panel members Consor Intellectual Asset Management, Deloitte, and Duff & Phelps.
Concern over patent evaluation
According to IPOS, one IP valuer is in charge of each application. However, among the seven valuers on the panel, only Consor has patent professionals. IP practitioners told Managing IP there may be a risk of underestimating an applicant’s patent assets if the deal is dealt with by a valuer without a technical background, meaning the applicant may not get the amount of money expected.
A patent attorney who agreed with the concern said the current seven valuers might be strong in brand or business valuation, but it is not clear if they can do a proper valuation of patents, where technical knowledge is key to understanding the true value.
IPOS responded to these comments: “We are pleased to have Consor, as well as other valuers on our panel, all of whom were appointed based on their experience in intellectual property valuation. We are aware that this is a relatively new area of expertise not just in Singapore, but in many parts of the world, and we would be happy to welcome other interested valuers to apply to be on the panel as well.”
How does the IPFS work?
The PFIs will be able to issue up to S$100m worth of IP loans under the IP Financing Scheme, which only applies to local enterprises who are incorporated in Singapore and use granted patents as collateral. Patents granted by any national IP offices is accepted as collateral, clarified Michelle Tan, director of IP ValueLab at IPOS. A company that is wholly owned by a foreign entity can also apply as long as it is incorporated in Singapore, she added.
But practitioners urged potential participants to think carefully before applying
“From my understanding, the Scheme is not suitable for early startups or SMEs who have just invented a product and seek capital to file for patent protection or commercialisation of certain IP assets, because a granted patent is needed as a pledge,” said Daniel Poh, partner of Marks & Clerk Singapore.
“But it can be very helpful for companies who have already obtained granted patents and are trying to leverage the monetary value of their patent assets and the money to commercialise their invention, expand their business further or perhaps enforce their IP rights, ”he added.
A successful applicant needs to obtain a valuation report from an appointed IP valuer who determines the value by considering various factors, including the invention behind the patent, the potential of the granted patent, the company’s business model and projected revenue.
Subsequently, the application will be processed by the respective participating financial institutions who conduct necessary credit assessment and due diligence on the companies and their IP rights before recommending the successful cases to IPOS for final approval.
“IP is not just a legal right, it is a business asset,” said Tan. “IPFS drives this idea home by allowing Singapore companies that are tech-rich but asset-light to raise capital by pledging their patents as collateral.”
Previously, loan applications came from a broad range of sectors, predominately from technology-heavy companies. With the addition of soft IP into the IP asset classes, Tan expects to see companies in creative industries, such as film, music and animation, using their entire IP portfolio for growth and expansion through IP-backed loans.
“It’s a useful initiative but it is still in the early days,” said Poh, “We expect IPFS to be a successful programme, though it needs to create more awareness and education of the idea that intangible assets can be collateralised in the industry.”
IPFS Panel of Valuers
Company |
Representatives |
[NEW] Baker & McKenzie.Wong & Leow |
Michael Nixon, Sanjiv Malhotra, Moiz Shirazi |
Consor Intellectual Asset Management |
Wes Anson, Jeff Anderson, David Noble |
Deloitte & Touche Financial Advisory Services Pte Ltd |
Keoy Soo Earn, Andrew Ooi |
Duff & Phelps Singapore Pte Ltd |
Srividya Gopalakrishnan, Ashish McLaren, Elaine Chai |
[NEW] Ernst & Young Solutions LLP |
Andre Toh Sern, Chua Ai Leng |
[NEW] KPMG Services Pte Ltd |
James Laya, Arnaud Guillemot, Joy Shen |
[NEW] PricewaterhouseCoopers Advisory Services Pte Ltd |
Kie Kok Keong, Adam Sutton |
