Hak Kekekayaan Intelektual

Sebagai Objek Jaminan Fidusia

Candra N Darusman

Creative Consultant

1

A little bit of Reflection*

All enterprises create economic value by

leveraging assets to finance or capitalize

operations and to fund future needs for capital.

During the last 25 years, the most valuable assets

have shifted from tangible assets to

predominantly intangible, knowledge-based,

intellectual capital assets.

*Mancini

2

Monetization

“Monetization” is value extraction; monetization

of IP is the process of extracting value from

intellectual property.

Intellectual property is one component of

“intangible assets”

3

HKI (IPR): Hak Kekayaan Intelektual

(Intellectual Property Rights)

Industrial Property

Patent

Trademark

Geographical

Indications

Industrial Design

Trade Secrets

Integrated Circuit

Copyright & Related

Rights

Copyright

Related Rights

Performer

Producer

Broadcaster

4

Types of works protected by

copyright

Paintings/drawings/

scetches

Music

Books/comics/print

Pamphlets

Sculpture

Works of architecture

Applied arts

Photography

Maps/plans

Audiovisual works

Database

Computer program

(software)

Lectures/addresses/

sermons

Dramatic or dramatico-

musical works

Choreography

5

5

Monetization of IP

Transfer

Licensing

Franchising

Collateralization; Securitization

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Monetizing IP*

IP can be

• Sold

• Licensed

• Used as collateral or security for debt finance or

equity from

*Norminsham

Family & Friends

BanksBusiness

Angels

VentureCapitalists

Government Grants

IBM’s Licensing

Revenue:

USD 2 Billion Annually

7

Collateralization of IP

Assets

A means of raising capital

Leverage on the asset value of patents,

trademarks, copyrights, trade secrets and know-

how.

Collateralization allows access to capital without

the complexity often inherent in securitization or

other means of monetizing IP assets.

8

Success IP financing deals

1884, Lewis Waterman, meminjam US$5,000,

dengan ‘jaminan’ pen patent (pena tinta)

1939, Chester Carlson, inventor Xenography,

mendapat investor (Haloid Company, XEROX)

karena patentnya

Sekitar 2005, pemilik restoran bebek panggang

menjual restorannya senilai $1,000,000 – berikut

resepnya (recipe, trade secret)

9

How do you monetize IPR

Can the owner monetize her or his work(s) without selling

them?

How different is it compared to selling IP works?

How do we value the work before negotiations?

Who would want to offer to lend money against

securitization of IP works?

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10

Basics

HKI /IPR is a moveable – intangible asset

Transfer

Legal right(s) being assigned to another party

License

Legal right(s) not transferred but given permission to use by another party

11

Basic elements

Tips before entering into an IP financing scheme:

Due diligence. To check who the right owner is and

terms are and parties to the license

Define the IP/CR work and rights subject to the

license

Territory of license

Term of license

Exclusivity

Payment

Accounting

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Marketing duties

Termination and recapture of rights (IP has a limited

validity protection)

Representations and warranties

Confidentiality

Escrow provisions

Bankruptcy

Successors and assigns

13

Merger

Duties after license expiration

Ownership agreements

Assignments

Security interests

Compulsory license

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You need to know the

price factor

(Value)

Market value of a creative work

Popularity of the artist

Past revenue stream

Estimated auction price

Historical value (sentimental value)

Subjectivity

Future revenue stream

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Valuation Methods

Market approach, which requires comparable

market transactions

Income approach, which attempts to determine

the income of the assets, considering both

expenses for utilizing the assets and the revenue

generated.

Cost approach, which assumes the expense for

replacing or reproducing the entity and

depreciation

16

Talking about the ‘value of copyright’

Music (melody, music sheets, handwritten lyrics )

Comics (collectors` item)

Object of art (painting, sculpture)

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17

Valuation Methods

Market approach, which requires comparable

market transactions

Income approach, which attempts to determine

the income of the assets, considering both

expenses for utilizing the assets and the revenue

generated.

Cost approach, which assumes the expense for

replacing or reproducing the entity and

depreciation

18

19Music

John Lennon’s:

“A Day In The Life”

Originally priced at US$800.000

Sold for US$1.2million at a New York auction house

‘All You Need Is Love’

(Beatles) for US$1.25 million

Source: Fox.com

20Comics

A rare copy of a comic book featuring Superman

1938 edition

Original price was 10 US cents

Ushering people into the age of

superheroes

ComicConnect.com and Metropolis Collectibles dealership brokered the sale

Anonymous seller and buyer

Source: IHT 24/2/10

21

Roy Lichtenstein

Pop artist’s comic-strip

Sold for US$42.6 million at Christie’s International, New York

Once labelled ‘the worst artist in the US’ in Life Magazine

Beat Andy Warhol’s Campbell’s vegetable soup (US$23.9 million)

Source: The Strait Times

22Painting

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La Belle Romaine By Amedeo Modligiani (1884-1920)

Painted in 1917

Auctioned at Sotheby

Anonymous buyer and seller

Originally priced at US $40 million

Sold at US $69 million in ten minutes

Source: IHT 4/11/10

24Picture or sculpture?

Giacometti’s work fetched US$.....(Ps65 million)

Originally priced between 12-18 million pound sterling

Auctioned at Sotheby Source: IHT 3/2/10

25Closer - back home

Norberto Roldan, the Philippines

Contemporary art shown at the Philippine Art Trek IV exhibitions in various galleries in Singapore

Part of a group of 46 contemporary Filipino artists

Price – five digits

Source: Strait Times, 12/11/10

Valuation Methods

Market approach, which requires comparable

market transactions

Income approach, which attempts to determine

the income of the assets, considering both

expenses for utilizing the assets and the revenue

generated.

Cost approach, which assumes the expense for

replacing or reproducing the entity and

depreciation

26

The Bowie Bond

In 1997, pop star David Bowie bundled together

the royalties of a music catalogue of his pre-1990

work to raise $55 million in capital. It became

known as the 'Bowie Bond.'

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28

Securitizing Copyright

Using IP asset to issue (sell) a bond. If you buy a bond, you

lend money to the buyer; the buyer of your bond will repay

the principal and give interest periodically.

Bonds are issued by Governments as well as private capital

companies

29The music bond

Examples of securitizing copyright

Music

David Bowie’s song albums

Already released

Still have future revenue stream

30

In 1997, David Bowie issued 10-year asset-backed bonds on the

basis of future royalties on publishing rights and master

recordings from 25 pre-recorded albums (before 1990 - 287

songs);

Bought by Prudential Insurance Company for the amount of

US$55 million

The purchaser of the bonds acquired the right to receive future

royalties from Bowie’s album until the principal plus 8% annual

interest is repaid.

31

Nickolas Ashford and Valerie Simpson*, songwriters and producers used the copyright on 247 of their songs as assets to back bonds, raising US$25 million

The deals were made by a New York investment banking: David Pullman of Pullman Group; other cases:

Dusty Springfield, James Brown, the Isley Brothers, estate of Marvin Gaye, Motown songwriting trio Edward Holland, Brian Holland and Lamont Dozzier** (US$30 million)

Rod Stewart did a $15.4m bond deal with Nomura Capital while Dusty Springfield received $10m.

32

Pullman Group charged 10% of the transactions

Iron Maiden became the first heavy-metal band to sell

bonds when it arranged a $30m deal in 1999. The deal was

arranged by the law firm Thelen Reid & Priest. Michael Elkin,

chair of the firm's Entertainment and Media Practice Group,

handled the negotiations

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Duane Hitchings has written songs that over the years have

been hits for artists including Rod Stewart, Heart, Kim Carnes,

Pat Benatar, Eddie Money, Tupac Shakur, Notorious B.I.G.,

Donny Osmond and Steve Perry. In November 1998, it was

announced that Hitchings' catalogue would be securitised

by David Pullman. Estimates of the value of the deal ranged

widely from $25-$100m

Overview of the Different Methods

Cost-based

Market-based

Income-based

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The choice should be influenced by:

o The kind of industry

o The degree of maturity of the technology

o The degree of risk

o The IP status

o Available information / price of comparable assets

How Choosing Valuation Methods

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o Combine several methods to get the envelope of values for each IP asset

o Valuation should be done on a regular basis

Suggestions….

36

37Case Study:

Collateralizing Copyright Example

Object of art

Photography: Annie Leibowitz photographs and negatives

38

Art Capital Company extended a loan of US$15.5 million as against collateralizing of Ms. Annie Leibowitz’s houses (property) and works of photograph;

Value of property approximately US$15 million; photographs at US$35 million; total value estimated US$50 million;

Value of collateral was more than 3 times higher than the loan..

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Interest 16% per annum

All copyright transferred in case of default

Art Capital Group (New York-based private investment company)

Other companies offering loan in exchange of objects of arts:

Art Finance Partners;

Christie’s

Sotheby

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US$500.000 loans

Charge interest up to 15% per annum

Estimate value of 40-50% of low-end of art’s worth auction

price

‘little known corner of art business, lightly regulated, highly

litigious’

41

celebrities (Louis Vuitton bag adv.)

42

celebrities

43

celebrities

44

objects

45

moments

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Annie Leibowitz

Trademarks

A distinctive name, symbol, motto, or design that

legally identifies a company or its produces and

services, and sometimes prevents others from

using identical or similar marks.

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Dreamworks $1b

Guess $75m

Athlete’s Foot

$33m

Gloria Vanderbilt

$30m

BCBG

$53 m

Bill Blass

$24m

IP Based Securitized Loans –

Success Stories49

IP Collateralization

BCBG Max Azria Group -manufacturer and retailer

of apparel, footwear and accessories

$12 million of the $53 million dollar loan

transaction was supported by a guarantee issued

by a credit enhancement firm based on the

collateralizationof BCBG’s IP

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Issues

Uncertainty surrounding intangible assets

Valuation (implicit & explicit value)

51

Licensing terms

Brand

Channels

Exclusivity

Minimum guaranteed royalty

Royalty rate

Minimum sales target

Sell off period

Term

Renewal period

Territory

52

Securitisizing of

trademarks

Valuing a patent portfolio or the trademarks for a

brand, is challenging because of the inherent

uniqueness of IAs and concerns about

transferability from the original company.

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Creative Economy In Thailand

A. Restructuring the Agricultural Sector

Supporting R&D in agriculture to enable Thailand to achieve its “kitchen of the world” mission

Promoting value creation of non-food products in order to expand Thailand’s export share in the international market

Utilising “local wisdom” and “Thai-ness” to generate “value creation” in products.

Creating brands and using marketing strategy to increase sales

B. Restructuring the Manufacturing Sector

Setting up a road map for “patent management”

Setting up an integrated national R&D system to promote innovation creation

Building and/or supporting entrepreneurs to create innovation

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► To promote OTOP (One Tambon - One Product), a product mark as stamped by the provincial administration body will be instantly granted a loan of up to Baht 0.5 million (US$ 16,667) limit at lenient interest rate of MLR, compared to MLR + 4% in general case. To the borrowing of more than US$ 16,667, project financing will be treated in an ordinary case.

► This is the previous administration policy set to help easing SMEs with working capital and/or project loan. Most of them are involved in handicrafts, local food processing as well as herbal medication.

55Breakthrough

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Job

creationEntrepreneur

build-up

Value

earning

Population

Realizing the added value in assets

Economic Wealth

Transform of IPR into EquityThe project was initiated in 2004 under Thaksin administration,

enabling people who own their IPRs to get access to the capital fund. SME Bank had contributed much to as many as 100 IP clients during 2004 – 2005 before the project was politically stalled by Coup D'Etat.

2004 - 2005 (totalled $ 2.3 mil – $ 2.6 mil)

Trade Mark 90%

Copyright 5%

Patent & Petty Patent 5%

N.B. NPL of IP was registered in a range of 10%-15%

57

China

IP pledge financing (16 kota di tahun 2010)

24 bank swasta terlibat

16 lembaga penjamin (terdaftar di kantor HKI

China)

Sudah 1400 deal dengan jaminan patent

1869 merek

146 hak cipta (773 diantaranya software)

58

Singapore

The three local banks — DBS Bank, Oversea-

Chinese Banking Corp and United Overseas Bank

— are participating in the scheme. Valuation of

the IP assets will be done by three appointed

valuers: American Appraisal Singapore, Consor

Intellectual Asset Management and Deloitte &

Touche Financial Advisory Services.Read more at

https://www.todayonline.com/business/singapore

-firms-can-now-use-ip-assets-collateral-bank-loans

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Singapore

2014 dimulai, hingga 2018 (S$100 juta)

Partisipasi pemerintah SG sebesar >50% dalam

pemberian pinjman dan sisanya bank swasta

2016 shoemaker MASAI mendapoatkan loan

AFC Merchant Bank, to the scheme alongside the

DBS Bank, United Overseas Bank and Oversea-

Chinese Banking Corporation, it said.

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Malaysia 61

IPVM Core Values

Valuation method acceptable to financial

institutions

Valuation approach which is easy to implement

and consistent with international standards and

cost effective in relation to the loan amount

Valuation model which is flexible and dynamic

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IPVM

Model intended for use by lenders in the financial

sector

IP assets must be pledged as part of group of

connected assets, which could tangible and

intangible assets

Limited to SMEs engaged in utilization of IP

Preferred model is Income Approach on RFR basis

(Relief-from–royalty) the future hypothetical royalty

payments the business is relieved from paying

because it owns the IP

63

Issues and perspectives

Yes, IP works can be securitized and collateralized

Upper market

Famous artists/inventors

Risky

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UN Guide 65

66

Sources:

Information sourced from Roy Davies, http://projects.exeter.ac.uk/RDavies

WIPO Magazine 5/2008

WIPO Guide on the Licensing of Copyright and Related Rights, Chapter 1, by I. Fred Koenigsberg

Professor Norminsham, UTIM, Malaysia, WIPO regional seminar in Singapore

Chalee Mahattanakul, Deputy VP, SME Bank, Thailand

Maria Augusta Mancini, META Group, Italy