Patent Securitisation Case Study

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In the past few decades, there has been a decrease in the value of tangible assets and traditional financing mechanisms. In contrast, the intangible assets, intellectual property rights, have progressively gained popularity and worthiness over the period of time. Intellectual property rights which consist of copyright, trademarks and patents are the significant assets of the companies as they can generate profitability for the corporations.

In the UK, a patent may only be granted for an invention that is novel, inventive and capable of industrial application. On the other hand, in the USA, a patent is issued for useful, novel and non-obvious invention and process that is not laws of nature, abstract ideas, or natural phenomena. A drug patent …show more content…

Apart from a small company and academic institution which have limited funds, even a large corporation with can use its patent portfolio for acquiring additional capital. The UK’s statutory definition of securitisation is “(a) transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched having the following characteristics: (a) payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures, and (b) the subordination of tranches determines the losses during the on-going life of the transaction or scheme.” The concept of securitisation is that the debtor-business entities securitising their assets, the patented innovations, by selling the stream of future cash flows to the SPV which are normally the royalty stream securitisation firms in exchange for its present value. Afterward, the SPV will issue securities which are backed with the predictable revenue streams from the originator in the market with the goal of selling them to the investors. Thereupon, the patent-backed securitisation provides the institutions or companies with the essential cash promptly which is vital in order to carry on and expand its research and development while enabling the companies to maintain control over the intellectual property as well as acquire capital without losing equity. Accordingly, the significant financing gaps between the earlier stages of the research in creating the invention and the later stages of the finished innovation based on the patent are bridged by the use of securitization as a raising funds tool. Moreover, people and entities which might never

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