Methods and Applications
- New Horizons in Intellectual Property series
Edited by Federico Munari and Raffaele Oriani
12. Patent-backed finance Federico Munari, Maria Cristina Odasso, Laura Toschi 12.1 INTRODUCTION Over the last years, intangible assets have become increasingly important as value drivers for companies operating in highly competitive environments (Lev, 2001; Levitas and McFadyen, 2009). The strategic relevance of intellectual property rights, and more specifically of patents, has lead companies to identify additional ways of extracting value from them. One of these ways relates to the use of patents to strengthen the company’s position when obtaining external finance. This chapter discusses the emerging field of patent-backed financing, analyzing how technologybased companies can leverage their patent portfolios to access equity investments and debt. We summarize the findings of more recent academic research on such issues and provide several examples of intellectual property (IP) deals in the United States and Europe, in order to highlight how a proper valuation of patents is fundamental when they are used as financial tools by IP holders and as investment assets by financial institutions and venture capitalists. The rest of the chapter is organized as follows. We will first discuss the main problems associated to financing innovative enterprises and the signaling value of patents for external investors. We will then focus on equity financing by Venture Capital (VC) firms, to clarify how the ownership of patents can facilitate VC investments and the valuation methods adopted by such types of investors. Finally, we will present the main patent backed financial instruments (patent loans, patent securitization, patent sale and lease-back), describing their characteristics, the attributes...
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