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For each patent portfolio, a risk-premiums is calculated in order to have a complete risk model of the IAB investment portfolio.
The IAB will have 2 different financing products in the portfolio [step 2]:
- Loans guarantee on intangible assets, namely patents and utility models
- Equity guarantee against company shares and commitment to install a knowledge manager
For product one
the process is as follows:
Intracom will provide the automated patent valuation methodology to IAB in order to be able to prove if a patent portfolio has requested minimum value or not [step 3]. If a certain monetary value of the patent portfolio is visible (thresholds needs to be defined), the collateral patent value can be determined and offered to the SME (via its bank) as a loan. The loan will be guaranteed partially with funds from EIF and other guarantee banks (e.g. KfW, Caisse des depots etc.). For the loan giving the bank the guarantee will be up to 100% (depending on the assets and existing guarantees), this means that they can reduce their risk of the loan to SMEs or offer additional financing based on the patent value. The IAB will act as an intermediary bank, not giving direct loans to SMEs but only via their local bank. By taking the patents as collateral in case the local bank or the SME doesn’t give IAB the possibility to audit and check the IP/IC balance in the SME who would receive a guarantee from the IAB. In some other cases, when we can have audits and checks of the SME’s IP/IC balance we will transfer to the “ product 2 “ concept ( see here below some other main steps have to be accomplished like shown in the graph:
Figure 2: Process of collateralization of patents
In case of default of a company the process will be as follows:
Figure 3: Process in case of default of patens collateralization
in order to reduce losses in case of default, IAB will start licensing activities when the transfer of patents is done(as long as this is not cannibalizing the clients business). This guarantees that in case of default a transaction to the licensee(s) is possible. The revenues from licensing will be shared between IAB and the SME.
For each patent portfolio, a risk-premiums is calculated in order to have a complete risk model of the IAB investment portfolio.
For product two
[step 4]the process will be as follows:
1 Assessment of the existing intellectual capital (IC)
IC is essential when patents are not given, not making sense or are not possible (e.g. in the software industry). In such a case we will disclose the value of all IA of the company in the present and future value and owned by the company (explicit) or not owned by the company, (knowledge that is only present in the minds of the collaborators of the company (tacit). IC will show a monetary value of the present and the future “explicit/tacit“ growth potential. The methodologies used for IC valuation is similar to patent valuation: using indicators, similarities and mathematical algorithms for calculation and are based on a high-level estimation exercise and an innovation DD Predefined multiple choice questionnaires are used in order to ease the data entry. The multiple-choice-principle should enable fast processing and should prevent entering precise numbers that are often not actually known or only roughly estimated. Also, the multiple-choice principle is much more tamper-proof than any other scoring method. The IC related questionnaire refers to 920 variables and parameters. This which will result in a present and future IC value (IC= AV-costs) and in a tacit (liability) and explicit (asset) value of an SME.
2 Installing a knowledge manager
Based on the first valuation step an agreement between the SME and the IAB will be signed, where the SME will install a knowledge manager [KM] inside the company. The aim of the KM is to transfer the developed tacit knowledge of the employees to explicit and increase therefore the value and assets of the company based on a structured approach. This will be a basic condition to get the guarantee for the loan or equity investments made by the SME’s financiers and guaranteed by the IA bank.
3 Offering to local banks
The equity offer against shares and the installation of a KM in the SME will be provided as a product to local banks in order to minimize their risks in financing. (turn the guarantee concept from “ who will pay in case of failure“ into the concept of “reduce risks so failure is less an option “. Entity IC has approved the methodology under real conditions, for example under the collaboration with VC’s (i.e. Apollonian), TTO’s (i.e.ASTP proton ) and corporate banks (i.e. Rabo, commerce bank).
Finally, the partner AIT will provide all necessary software platforms for a proper work of the IAB [step 5]. Beside the installation of DMS, CRM and CMS interfaces between the IP and IC valuation will be implemented to have a common working platform.
Though the current proposal is not a technology development project, some technical modules and common platforms have to be developed in order to ramp up the IAB business properly. The technology platform is shown in the following figure:
Figure 4: Technical software platform of the IAB operations
4State of the art analysis
In Europe, there does not exist an institution which gives loans or guarantees for patents or other IA as collaterals. There might be bilateral business between corporate loan departments in banks with their clients in taking the patents as well into the guarantee scheme, but there is no official product in the market.
In Asia there are several programs, mostly government funded and backed-up from the development banks, for example: In Korea there exist 2 types of patent securitization: namely IP guarantees, and IP loans; for both, the maximum allowed loan amount is in the order of USD $1 mil.
Challenges and Threads
The main problems to be solved for taking patents and/ or other IA as collateral are well described in the OECD paper4.
Accounting Series – Article No: 37 (Magazine Published May 3, 2019)
Accounting Theory – Advanced Part 27
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Categories: Accounting, World, Magazine
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