The failure of Silicon Valley Bank was largely a failure to understand depositors and the viability of their assets. Some specialized banks are striving to avoid that.
Over the past nine years significant steps were taken legislatively by stakeholders in Jamaica to facilitate collateralizing intellectual property assets, like copyrights, trademarks and patents by micro, small, and medium-sized enterprises (MSMEs).
Jamaica’s low GDP may fueling its emergence in IP than impeding it. MSMEs account for approximately 97% of businesses in Jamaica. Jamaica’s 2021 gross domestic product was $14.6 billion, ranking it 140 out of 196 countries globally.
Adoption has been slow. “While some local banks do accept IP assets as collateral, albeit on a small scale,” reports the Jamaican Observer, “IP collateralisation has not yet been mainstreamed in secured lending locally.”
The passage of the Security Interests in Personal Property Act 2013 (the SIPPA). The SIPPA expanded the range of property that could be used as collateral for loans to include movable personal property, like IP assets.
“While some local banks do accept IP assets as collateral, albeit on a small scale, IP collateralisation has not yet been mainstreamed in secured lending”
Getting creators and businesses to register their assets so that they may be valued and potentially collateralized has been a hurdle. The better creators understand the meaning of what they own in terms of the marketplace, the more likely they are to engage successfully with banks and other financial institutions.
What matters most to lenders is resale value in the event of a devault. That requires a reliable valuation and market comparables.
New Initiatives
From an institutional standpoint, Jamaica Intellectual Property Office (JIPO) has been working to promote the collateralisation of IP through various initiatives, including its recent launch of a collaborative project to “strengthen…the Intellectual Property Ecosystem to increase innovation, competitiveness, and growth in Jamaica”.
The better creators understand the meaning of what they own in terms of the marketplace, the more likely they are to engage successfully with banks and other financial institutions
Forbes Council member, Jason Jackson, writes that there are four basic types of financing that use IP as collateral:
- IP-Backed Loans
- IP Sale-Leaseback
- IP Litigation Finance
- IP Securitization
For Jackson’s cogent article about the benefits and drawbacks of IP-based financing, tap the link.
Jamaica has a rich tradition of music, design and food developments and businesses in which copyrights, trademarks and trade secrets play an important part. Design and utility patents are also factors.
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Kudos to Jamaica for innovating in the IP space by encouraging more and better IP valuation and the use of IP assets to support lending.
Image source: JIPO
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