Using Intellectual Property to Secure Financing after the Worst Financial Crisis since the Great Depression
Jacobs, Brian W., Marquette Intellectual Property Law Review
INTRODUCTION I. BACKGROUND AND HISTORY OF USING INTELLECTUAL PROPERTY TO SECURE FINANCING A. Background On Patents B. Background on Trade Secrets C. Background on Trademarks D. Background on Copyrights E. Statutory Analysis on the Use of Intellectual Property as Collateral II. ADVANTAGES AND DISADVANTAGES OF USING INTELLECTUAL PROPERTY AS COLLATERAL A. Advantages of Using Intellectual Property as Collateral B. Disadvantages of Using Intellectual Property as Collateral III. INTELLECTUAL PROPERTY USED AS COLLATERAL DURING THE FINANCIAL CRISIS AND THE FUTURE OF USING INTELLECTUAL PROPERTY AS COLLATERAL A. Intellectual Property use as Collateral During the Financial Crisis B. The Future of Intellectual Property as Collateral to Secure Financing IV. Conclusion
Ever since Thomas Edison first used his patent on the incandescent electric light bulb as collateral to secure financing to start his company, the General Electric Company, intellectual property has been able to be used as collateral. (1) Although not immediately thought of when securing financing, using intellectual property as collateral has occurred ever since the late 1800's with Thomas Edison. (2) In recent years, using intellectual property as collateral to secure financing has become quite popular. (3) However, as with most financing in general, the use of intellectual property as collateral has slowed due to the first recession in the twenty-first century. Even though there have been signs of the recession coming to an end and recovery starting in the beginning of 2010, (4) will the use of intellectual property to secure loans ever bounce back?
There are two types of intellectual property that can be used to secure financing: legal intellectual property and competitive intellectual property. (5) Legal intellectual property refers to patents, trademarks, copyrights, and trade secrets, while competitive intellectual property usually refers to proprietary know-how, collaboration activities, leverage activities, and structural activities. (6) This Comment will focus on using only legal intellectual property to secure financing so competitive intellectual property need not be discussed any further.
This Comment will explain the use of intellectual property to secure financing and then the possible future use of intellectual property as collateral. Part I will explain the history of using intellectual property as collateral in securing financing. Part II will explain the advantages and disadvantages of using intellectual property as collateral. Lastly, Part Ill will explain the use of intellectual property as collateral during the recession and then the possible future use of intellectual property after the recession. As the united states grows farther away from a manufacturing-based economy and closer to a technology-based economy, the use of intellectual property as collateral will continue to be more prevalent. Even though the use of intellectual property as collateral declined during the recession, it will increase again and continue to rise in use in the future.
I. BACKGROUND AND HISTORY OF USING INTELLECTUAL PROPERTY TO SECURE FINANCING
Collateral is used to secure financing in lending agreements. Collateral is a borrower's promise of specific property if a loan is not repaid. (7) When using intellectual property as collateral, the borrower is promising the rights of his intellectual property (be it patent, trade secret, trademark, or copyright rights) if he does not repay his loan. (8)
Intellectual property was first used as collateral to secure financing by Thomas Edison in the late 1880s. (9) Edison used his patent for the incandescent electric light bulb as collateral to secure financing for his own business. (10) That business would eventually become the General Electric Company. …