Intellectual property (IP) is emerging as a significant and crucial intangible property in trade and commerce globally. The share of intangible property is much larger than that of tangible property in most technology driven successful companies. It is therefore essential to focus on IP for sustenance, expansion, consolidation and profit generation of a company. IP can be used as a new and direct instrument for raising funds from financial institutions, venture capitalists and angel funds for initiating new and expanding the existing business. IP is seen regularly in practically all cases of Mergers and acquisitions (M&A) and Joint Ventures as a key determining factor.
Use of IP as collateral will have to be supported by suitable legal provisions including appropriate rules and guidelines to be issued by financial institutions. This subject has received very little attention In India in spite of the fact that in many other countries IPR are used as collateral instrument. Institute of Chartered Accountants of India (ICAI) has come out with some guidelines for valuation of IP assets which is the first step in collateralizing IPR. There are certain Acts like the IT Act which provide for valuation of IP for the purpose of taxes. Confederation of Indian Industry (CII) feels that it would open a new window for financing, though not fully determinate today, but has a bright future for financing companies.
CII has been pursuing the subject in its National IPR Committee from time to time including standalone discussion. We have recently come out with the publications on this subject, “IP backed financing-using IP as collateral” prepared in consultation with Duffs & Phelps respectively which were released in an International IPR Conference organized by CII in December 2019 .