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I have not, but it is becoming fairly common in some industries. Obviously, if you have intellectual property that is already generating revenue, it will provide more security than property that isn't. For instance, when Michael Jackson borrowed money using his publishing rights to Beatles songs as collateral, the lender could place a realistic dollar value on those songs as security. If I were to go in to the same lender with a songbook crammed full of emo by the kid next door, it wouldn't have the same impact -- probably none at all.
Great question. As Lighthouse said it is a new form of collateral.
Maybe the following will help.
Although the use of patents as collateral to
secure financing has not been a popular practice, many small firms
and individuals are interested in doing so. A major obstacle to
using Patents as collateral is the inability of investors and lenders to
assess the risk associated with collateralizing patents.
an interest against what you own and the transaction is registered with
the state. If you go to a second bank, they will find the first lien.
But when you use intangible assets, how do banks find out who the owner
is and whether there are any pre-existing encumbrances against that
asset? Because the
due diligence process is so complex, some lenders and investors may
States Patent and Trademark Office is starting a pilot project to find a way using innovative,
web-based technology to make it easier for inventors, entrepreneurs and
small businesses to leverage their intellectual assets.
LUCKIEST: see www.peertopatent.org
I have one patent and another in process. I hold them in my personal name and license them to my company. If someone makes an offer to purchase the application I then have several ways to profit including cashing out. I still have options. Thats what you want to maintain...options.
DDiva, relative to your situation, I understood that the question was if you (as patent owner) wanted to borrow money, how would the patent you're holding be valued by a lender (as collateral) if that was what you were proposing to offer as security? Do you think it would it based on the licensing fee you've established, or something else?
In my mind, the value of the patent would be relative to the size of the market that the application could capture and hold minus 10-15 % as a fudge factor.
Personal licensing fees say from a patent owner to the company they founded are very small. The idea is to establish that a transaction has taken place to set precedent and that the patent is being used with the patent owners permission. I have as an individual licensed the patent to AviaSphere thus a licensing precedent has been set.
Example: I have licensed code from another group for an application for aviation only for a very small sum. I can only use that code in the avaition application. If I take my idea and go into the medical field...then the licensing of that code that helped us at first would have to be re-negotiated with the second application.
Personally I do not see an untried not to market patent as a useful collateral tool. Seems to be a vehicle for wasting a lot of time on both sides of the table. But thats just me....and others may have different ideas.
That makes sense -- thanks!
I have a few patents so I am really curious to see what you have discovered.
Commercial banks typically do not use patents as collateral. It was on a case by case situation and required special approval from underwriting management.
If this loan is to be done, your patent needs to have high value to it; usually based on financial statements for the company.
That being said, it all leads back to "financial statements."