Analysis of Advantages and Disadvantages of Intellectual Property Securitization

At the end of 2018, China has made some substantial progress in the securitization of intellectual property rights. On December 21, 2018, the Shanghai Stock Exchange successfully issued my country's first intellectual property securitization product "Qiyi Century Intellectual Property Financial Asset Support Special Plan". The underlying asset bonds of this product are all intellectual property rights. The total scale reached 0.47 billion yuan. The original owner was Tianjin Juliang Commercial Insurance Co., Ltd., and the core debtor was Beijing Qiyi Century Technology Co., Ltd, the current rating agency United Credit Rating Co., Ltd. gives all AAA ratings. In addition, the "First Entrepreneurship-Liberal Arts Leasing Phase I Asset Support Special Plan" was also successfully approved on the Shenzhen Stock Exchange. The underlying asset lease subject matter of this product is intellectual property rights such as patents and copyrights, with a total scale of 0.733 billion yuan. The original owner is Beijing Cultural Technology Financial Leasing Co., Ltd. The introduction of these products indicates that the operational capacity and level of intellectual property rights in China have reached a new height.

Unlike traditional financing methods, intellectual property securitization is supported by the expected future returns of intellectual property rights and is financed through the issuance of market-circulating securities, the most important feature of which is that the underlying assets will no longer be physical assets, but intangible intellectual property rights. The subject matter of intellectual property securitization is generally intangible assets such as invention patents, utility model patents, and copyrights. By giving intellectual property securitization the same value as intellectual property rights and physical assets, it realizes the value transformation of intellectual property rights in the capital market. It has opened a high-efficiency and low-cost path for capital to enter the field of technological innovation.

Intellectual property securitization has brought many positive effects to high-tech enterprises, investors and even the development of domestic intellectual property industry.

First of all, for high-tech enterprises, the existence of intellectual property securitization will provide an additional way of financing. At present, the conversion rate of high-tech intellectual property rights in my country is relatively low, and even the conversion rate is less than 10%. One of the reasons for this phenomenon is the traditional financing method. Traditional financing methods are mainly concerned with the overall creditworthiness of the financing enterprise, in which the credit base is all the assets of the enterprise, sometimes referring specifically to tangible assets, but rarely pay attention to the value of certain specific assets. However, for some small and medium-sized technology-based enterprises, they have a large number of intellectual property rights, but due to the lack of physical assets, it will be difficult to raise the funds needed for their development through traditional financing methods, which will seriously restrict these small and medium-sized technology-based enterprises to transform their high-tech into corresponding products. The securitization of intellectual property rights will become one of the ways to solve the financing difficulties of small and medium-sized enterprises, which will help to improve the conversion rate of scientific and technological achievements and accelerate the process of science and technology in China. Moreover, intellectual property securitization is different from the transfer of intellectual property rights. It does not lose the ownership of intellectual property rights, but only gives up the income of intellectual property rights in the future (such as conversion income and licensing fee rights). Therefore, through this way Financing can not only obtain the corresponding financing but also preserve the core intellectual property rights of the enterprise, thereby further improving the core competitiveness of the enterprise.

Secondly, for investors, there will be one more target to invest in the real economy. Because intellectual property documents are open and transparent, and their legal relationships are relatively clear, investors can obtain information about these intellectual property rights through open channels, evaluate the price of the asset by analyzing the quality of the intellectual property rights, and analyze the company's R & D level, and then make relevant investment decisions.

Finally, intellectual property securitization will have a positive impact on the domestic intellectual property industry. At present, with the increasing importance of intellectual property rights in China, domestic enterprises have gradually realized the importance of intellectual property rights. Domestic intellectual property rights, especially patents, have been far ahead in the world in terms of quantity, but there is a widespread phenomenon of low quality. If the securitization of intellectual property rights is normalized in the future, enterprises will pay more attention to the quality of intellectual property rights; in addition, if the securitization of intellectual property rights allows enterprises to obtain financial support, enterprises will have more motivation to carry out further research and development on the basis of the original intellectual property rights, gradually forming a virtuous circle to promote the scientific and technological progress of enterprises.

Of course, intellectual property securitization is not a one-way all advantages, there are certain risks.

First of all, intellectual property rights can be repeatedly authorized, each authorization will produce new contract bonds, each authorization will affect the original market pattern, the original licensee may face competition leading to a decline in income, and thus affect the investor's principal and interest income. Secondly, the scope of intellectual property rights may be unstable, because infringement and invalid cases are highly professional and subjective, and it is difficult to find out their specific value through investigation. Once the patent is invalidated, there is a risk that the investor will not be able to obtain the expected principal and interest payments. In addition, the market value of intellectual property is difficult to determine. Due to the rapid development of science and technology, the update speed of technology is very fast, and the value of intellectual property rights will be affected by consumers, market conditions and even their substitutes. Therefore, the market value of intellectual property rights may have very large fluctuations in the short term. Therefore, it is also extremely important to construct a suitable valuation system for the development of intellectual property securitization.

In view of the possible risks, investors should find professionals to analyze the value and stability of intellectual property rights before making investment decisions, and supplement them with corresponding authorization restrictions to improve the certainty of investment.