IP-backed financing is a dynamic and strategic approach that bridges the gap between companies that have extensive intangible assets and capital. In today’s ever-changing business ecosystem, where innovation is growing at an unprecedented pace, understanding the significance of IP-backed financing is crucial. This approach enables companies to utilize their patents, trademarks, copyrights, and other IP assets as collateral, unlocking value and funding for necessary business functions like growth, research, and development. The following three case studies exhibit real-world examples of large corporations successfully utilizing IP for financing which helped them continue their operations and stay afloat.
Masai – Singapore’s first IP-Backed Financing Deal
Masai, a global contender in the footwear industry specializing in shoe design, marketing, and distribution, obtained a patent in 2008 for its innovative physiological footwear which enhances the body’s support system. The shoes quickly gained popularity, but this success was eclipsed by a surge in counterfeit products flooding the market at lower prices. These knockoffs severely impacted Masai’s sales, pushing the company perilously close to bankruptcy.
In 2016, Masai Group International faced a pivotal moment when it secured a substantial seven-figure loan, utilizing its patented physiological footwear technology as collateral. This groundbreaking financing arrangement marked Masai as the first company in Singapore to secure an IP-backed loan under the nation’s IP Financing Scheme. The infusion of capital gave new life to Masai’s struggling business, enabling it to not only escape bankruptcy but also to retrace its path back to growth. With the financial assistance provided by the loan, Masai was able to channel resources into crucial business activities such as IP protection, research and development, and advertising. Read more about the current IP-related programs and initiatives in Singapore here.
Kodak’s tale of using patents
In 2012, Kodak faced a dire predicament as its digital imaging business struggled amidst declining sales, leading the company to the brink of bankruptcy. In a bold move to salvage its operations, Kodak leveraged its most valuable assets—the extensive portfolio of digital imaging and processing patents. Recognizing the inherent worth of these intellectual property assets, Kodak made the strategic decision to sell approximately 1,100 patents, fetching $525 million. Although some market participants claim the patents were expected to be valued around $2.6 billion, the situation and market pressures led to yielding a lower amount. Regardless, this infusion of capital by the consortium of firms like Apple, Google, Samsung, and Facebook proved to be nothing short of a financial lifeline for Kodak. With the proceeds from the patent sale, the company gained the ability to repay a substantial portion of its outstanding loans and debts. This alleviation of financial burdens provided Kodak with much-needed breathing room.
Kingfisher Airlines
One of India’s largest airlines in the last decade with a five-star rating from Skytrax, Kingfisher Airlines, was worth $550 million at the time. Although not common in India for brands to use their brand name as collateral to secure loans, this was a rare case. The airline’s brand name was pledged to 14 lenders, including State Bank of India (SBI), IDBI Bank, Punjab National Bank, Bank of India, and Bank of Baroda under a debt recast agreement in which loans valuing INR 65 billion were restructured and converted into equity.
Using IPs to finance has given companies numerous benefits in the past and even saved some from the brink of collapse. The transformative power of IP-backed financing in revitalizing businesses in distress is often ignored. Apart from the extreme cases, there are several start-ups and medium-scale businesses in different sectors like technology and pharma, that use their IPs, especially patents to secure funding for their next project, or research and development. As both corporations and governmental bodies strive to raise awareness in the public about financing backed by intellectual property, there should be a rise in the visibility of more such events.
(Sources: First IP-Backed Loan Approved In Singapore. – Conventus Law, First IP-backed loan approved in Singapore (pinsentmasons.com), IP as Collateral | IIPRD) Top of Form
(Sources: IP finance: That Kodak patent sale: a look at the transaction, Kodak to Sell Patents for $525 Million – The New York Times (nytimes.com))