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Thursday, October 7, 2010

Patent as a collateral

Recently as part of the government policy to encourage invention and application of patent from Chinese inventors, banks in China started to use patent right as part of collateral for a commercial loan. As of September 2010, there are 24 banks and 16 guarantee companies in China accepted such property as collateral.

Currently, the total cumulative loan portfolio of the amount RMB25 billion (around USD3.7 billion) was borrowed in 2000 projects that involved at least one patent right as part of collateral, that is, around USD1.8 million per project. According to the report dated September 30, 2010, the new loans approved in the first eight months of this year tallied to 77 cases that involved 504 patent rights with a total of of RMB 4 billion (around USD 600 million).

However, the report did not disclose the average value of each patent right in each loan and what other assets were involved in the loan application process. So in the end, may be the the banks are still considering the hard asset that are used to pledge the loan, and then throw in any intellectual property just to please the government officials. The report also mentioned that the current policy of using patent right as loan collateral is still at it's pilot stage since December 2008 and we are not sure how aggressive banks and other financial institutions to take on the surge in patent application from Chinese inventors.


Michelle said...

Does the patent need to be registered before it can be a collateral? Do we need patent agents for the process?

Patent Agent said...

You must have the right to an asset in order to pledge it as collateral. Yes, you need to apply for a patent before put forward to the bank as collateral.

In the process, you need a lawyer more than a patent agent to handle the transaction.