The WIPO Information Meeting on IP Financing: some notes

The IP Finance weblog would like to offer its sincere gratitude to Baskut Tuncak for preparing the following notes. Baskut is a fellow with the Center for International Environmental Law (CIEL) in Geneva; he works in the IP, Trade and Sustainability department, looking at Tech Transfer of Environmentally Sustainable Technologies. Baskut writes:

"WIPO held an information meeting on IP Financing on 10 March, 2009 in Geneva, Switzerland. Director-General Francis Gurry began the conference by identifying what he believed to be the principle reasons for considerable difficulty in developing IP Financing: (1) the lack of a clear connection between the security and the underlying asset, and (2) the complexity and lack of transparency in the IP system results in distrust for the intangible economy.  

Mr Lorin Brennan (of Grey Matter LLC) further elaborated that, in the context of UNCITRAL’s efforts to harmonize international secured transaction laws, considerable difficulty is presented by legal systems utilizing a pledge-possession based property system. Specifically, Mr Brennan noted that, without IP filing mechanisms in place, IP financing is impossible in nations with pledge-possession based property system. 

Mr Brennan identified several areas requiring further development to develop a robust, global IP Financing system: (1) Draft a generic law of financing that is applicable for all types of IP under all current international IP related conventions; (2) Coordinate priority systems in IP financing with priority systems in debtor financing; (3) Refine IP valuation methods from the Basel 2 method currently used; (4) Increase the strength of IP laws and the reliability of registries; (5) Integrate underwriters and title insurers to help increase confidence in IP securities. 

Responding to Mr Dalindyebo Shabalala’s request for clarification, Mr Brennan explained that he was not advocating for, or against, harmonization of global IP laws.
Professor Neil Cohen, author of the IP Annex to the forthcoming UNCITRAL Legislative Guide on Secured Transactions, explained that the Guide takes a functional approach and will have a broad scope, applying to both tangible and intangible property. For both types of property, the Guide will cover the relevant conflicts of law issues. However, according to Prof. Cohen, it is presently unclear to the drafters as to whether the law of State in which the asset is located (as is the case with tangible property), or the law of the State in which the grantor is located (the case with intangible property) ought to apply to IP, due to the geographic limitations of IP laws.

Sprios Bazinas, Secretary of UNCITRAL Working Group VI, spoke of the need to have robust valuation methods in place. He also explained the need to harmonize insolvency laws along the way to developing a viable IP Finance market. Accordingly, the Guide’s IP annex will have a section devoted to insolvency issues. However, harmonization of insolvency laws requires coordination of two different UNCITRAL working groups.  

Regrettably, very little attention was placed to two key issues. First, an in-depth discussion of how the current financial crisis is impacting both current and future efforts to securitize IP assets was sorely missed. Second, and perhaps on a related note, while numerous commentators acknowledged the difficulty in valuing derivatives, no discussion was devoted to current IP valuation methods, auctions or otherwise".

The presentations of the various speakers may be accessed here.