Guangzhou Daily: Guangdong helps sci-tech firms turn IP into cash

Many small- and medium-sized enterprises (SMEs) may have "human brains" as intellectual property (IP) but lack fixed assets.

Different from fixed assets such as housing and land, IP is an intangible asset in which enterprises invest a lot of hours, material and financial resources, as well as other costs.

A majority of technology-based SMEs are poor in offices and factories, even though those may be rented. However in terms of IP rights, they are quite "rich", because they could live on with one core technology with independent IP rights.

As for banks, most traditional mortgage collateral must be physical. However, the amount of loans obtainable by limited physical mortgages cannot keep up with the enterprise's development.

In 2017, the Guangzhou High-Tech Industrial Development Zone and Guangzhou Development District (GDD) issued a policy document concerning IP to better meet the demands of enterprises and solve the problem of financial institutes securing enterprises' loans with only fixed assets rather than IP such as patents.

The policy encourages technology-based enterprises to apply for IP-pledged loans, and subsidizes the necessary evaluation, guarantee and insurance fees involved up to 100 percent.

Over the past three years, the district supported 2 billion yuan ($288 million) of patent pledge financing, solving financing problems for nearly 100 companies.

In the first five months of 2019, 36 patent pledge financing arrangements have been completed for a total of 505 million yuan, accounting for 42.5 percent of all the city's financial subsidies. Patent pledge financing was offered to 34 technology companies.

The steady development of that kind of financing has laid a strong foundation for the Guangzhou High-Tech Industrial Development Zone to further explore the emerging role of IP as a security asset.

To be brief, the financing is based on the expected earnings of IP, and issues marketable securities.

The district has designed an IP-securitized product that is based on the core patent license fees of technology companies. At present it is striving to issue it as the first ever IP-securitized product in China.

Tong Jianping, deputy director of the GDD's IP office, said that the first-round IP-securitized product is based on the core patents of scientific and technological enterprises in the district, is closely tied to the industrial entity and technology innovation and is a sustainable and reproducible product.

Tong Jianping, deputy director of GDD's IP office [Photo/Guangzhou Daily]

Currently, the district has chosen 11 technology enterprises as the issuers of the first-round IP securitized product. The underlying assets include 103 invention patents and 37 utility patents, with a financing scale of approximately 310 million yuan. Each enterprise can get a fund ranging from 3 to 45 million yuan through the project.

The Patent Examination Cooperation Guandong Center of the Patent Office, China National Intellectual Property Administration, is located in the Huangpu district of Guangzhou. [Photo/Guangzhou Daily]

Share - WeChat