With the active promotion from the State Intellectual Property Office in recent years, the construction of China’s intellectual property rights system has continued to accelerate. The intellectual property asset-backed securities (ABS) and insurance businesses have developed steadily as a result.

What’s Being Securitized This Time?

The name of the IP ABS issued this time will be “The First Phase of the Liberal Arts ABS” (文科一期ABS). The underlying assets for this security are all intellectual property rights such as invention patents, utility model patents, copyrights, as well as other such property rights.

The underlying assets of the first phase of IP ABS are the “intellectual property financing lease” for businesses with patents and copyrights. There are in total 51 intellectual property rights, such as patents and copyrights, covering a number of sub-sectors in the fields of cultural and creative fields such as art performance, film and television production and distribution, information technology, and digital publishing.

The future operating cash flows of these intellectual property rights will be used to price its underlying assets. This not only meets the requirements of asset securitization for these assets, but also meets the need of the intellectual property rights owners. It has the unique advantages of diversified assets, mature risk control system, and high credit rating of issuing entities.

The Issuer — Cultural Technology Leasing

According to the release article, the main body of the issuance, the Cultural Technology Leasing(文化科技租赁), was established in 2014. It is a subsidiary of Beiwentou Investment Co., Ltd. (北文投), which provides comprehensive financing services such as financial leasing for enterprises.

In September 2015, the Cultural Technology Leasing pioneered and started the “IP financing lease” process in the country in order to solve the problems enterprises were facing. In the past, it was hard for enterprises to obtain bank financing through traditional means, such as real estate mortgages, since the properties are often light assets and smaller in scale. The IP financing lease fully revitalizes the intellectual property rights of enterprises and opens up a brand new intellectual property opportunity in addition to the banks’ Intangible Asset Mortgage.

Over the past three years, Cultural Technology Leasing has provided more than 8 billion Yuan of financing support to more than 400 cultural and technological enterprises through intellectual property financing leasing. This business accounted for nearly 40% of the company’s investment, much higher than the current commercial banks. However, these loans account for less than 0.1% of those issued by banks, of which Small and Medium Enterprise (SME) projects account for more than 75%, and private enterprises account for 92%.

Implement an Effective Assessment of Intellectual Property Values and Strict Risk Control

To deal with the problem of value assessment and risk control in IP securitization, Cultural Technology Leasing has established an expert team of 120 people to explore a relatively mature IPR assessment method and risk control system in years of business practice. The intellectual property rights of ABS have undergone strict risk review. The value of each right has been professionally evaluated and strictly demonstrated by independent third-party asset appraisal agencies.

The Promiser of the Differential Payment: State-Owned Sole Proprietorship Company: Beiwentou

The first phase of the liberal arts ABS had Beiwentou as the promiser. Beiwentou is a state-owned sole proprietorship company in Beijing. It is an important investment and financing platform for the development of IP ABS. It has now formed six major businesses of finance, with a total value of more than 44 billion yuan in assets, which are the first investment enterprises in the country to receive the AAA credit rating.

The Future:

Since 2008, intellectual property protection has risen to a national level. With the continuous strengthening of China’s intellectual property protection and the gradual improvement of the intellectual property operation system, various types of intellectual property rights have developed rapidly, showing an increasing trend year-by-year.

Taking patent rights as an example, as of October 2018, China’s 2018 patent applications has led to more than 3.51 million listings, and the number of valid patent applications has exceeded 11.5 million. The demand for intellectual property conversion of small and medium-sized enterprises has been increasing as well. Intellectual property financing is becoming an important financing means for SMEs, and intellectual property financing leasing potential is quite large.

Reference：

史上最穷且最不靠谱的会，却创造了人类历史上最多的财富 by 石榴区块链

朱嘉明：“技术奇点”逼近，建构区块链数学基础 by 巴比特

区块链源起与信任机制重构 by 魏然

我国首支知识产权证券化产品在深交所成功获批 by 新华社