By Saowanee Leewijitsin
Over the past several months, the whole world has been experiencing unprecedented challenges due to COVID-19. This virus is not only capable of causing severe effects to our physical health and possibly drastic long-term changes to how we live and work, but also could cripple the world economy and the stock market. Many businesses around the world have to close their doors either temporarily or permanently because of the impact of this virus.
In the time of this turbulent crisis, if you are the one of those entrepreneurs suffering due to this virus and you are looking for financing alternatives to cover cashflow shortfalls for your company expenses, as the IP experts, we have some ideas for you…
Many entrepreneurs may not expect that the trademarks, copyrights, and patents that you have in your company or organization could essentially help keep your business afloat as security for a loan. Not many are aware that you could use your Intellectual Property (IP) as one of the collaterals in securing loans under the Business Security Act B.E. 2558 (2015) (“Act”), even though this Act has already been in effect in Thailand for almost four years.
The Act does not only limit the collateral to just IP, but Business; Account receivable; Movable property used by the borrower in business operation such as machinery, inventory, or raw materials used in the manufacture of goods; Immovable property, where the borrower operates directly in real estate business; or even the perennial plant could also be used as security. Additionally, businesses of any size in any industry can be the “borrower” and benefit from this Act.
Prior to the Act, when we talk about “security interest”, we are familiar with only two traditional securities under the Thai Civil and Commercial Code, that are “pledge” and “mortgage”. For pledge, the security is required to be delivered and retained by the creditor (i.e. “financial institution”) for the duration of the security period. Contrariwise, there is no requirement to deliver the security to the creditor under the Act, unless both parties agree otherwise. This means the borrowers could have easier access to the sources of funding; while still being able to use the operating assets, such as the IP or machinery, as security without security delivery. This Act therefore does not just act as an additional financial security option to Thai entrepreneurs but it also highlights the significance of IP as a valuable asset for every business.
The advantages of having exclusive IP rights do not stop there. Entrepreneurs who own IP can also decide how and when to exploit the benefits of the rights over the IP. For example, you may assign, sell, license, or franchise your business together with your IP rights whenever you want.
In 2012, we all heard the news about the bankruptcy of Eastman Kodak Company (“Kodak”), the 132-year-old imaging company, but we might not know that a key step that Kodak took at that time in order to stave off bankruptcy was selling their digital imaging patents for about USD 525 million to a group led by Intellectual Ventures and RPX Corp. The deal for 1,100 of Kodak’s patents allowed them to secure USD 830 million in financing to emerge from bankruptcy.
In the time of crisis, it is hard to believe that IP portfolios would be a major asset to companies, especially when the bankruptcy is filed, nevertheless – even if it is intangible, it doesn’t mean it is valueless.
In addition, possessing a strong, registered brand with goodwill and reputation gives you the alternative of franchising your business. This could be a savvy move to consider, especially post-COVID-19. People who have lost their jobs but still have some savings may be looking for an income opportunity, which can come in the form of taking up small but known local franchises. At the same time, franchising your business would allow you to expand your existing markets or enter into the new markets, without incurring substantial capital and risk. So, even in the midst of the crisis, there are always opportunities out there – you just have to know where to look and who to consult.
If you would like to know of more opportunities that IP offers to you and your business, or would like to leverage your IP as a source of financing, do seek guidance from qualified and experienced IP experts – we are always at hand should you need any advice!
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