Patent Office: "IP Finance Reaches 2 Trillion Won Era... A Boon for Venture and Small-Medium Enterprise Funding"

Status data of annual intellectual property finance scale (based on new supply) from 2016 to 2020. Provided by the Korean Intellectual Property Office.

[Asia Economy (Daejeon) Reporter Jeong Il-woong] The scale of domestic Intellectual Property (IP) financing has exceeded 2 trillion won.

According to the Korean Intellectual Property Office on the 4th, last year's IP financing scale was 2.064 trillion won, a 52.8% increase compared to the previous year (1.3504 trillion won).

IP financing refers to a series of activities to raise funds using intellectual property rights. Fundraising is conducted through the valuation of the IP held by companies, and financial institutions provide IP collateral loans, IP guarantee loans, or IP investments.

Last year's IP financing by type was subdivided into ▲IP collateral loans secured by intellectual property rights amounting to 1.093 trillion won ▲IP guarantees based on intellectual property rights amounting to 708.9 billion won ▲IP investments directly made in companies holding excellent intellectual property rights or in the intellectual property rights themselves amounting to 262.1 billion won.

Among these, IP collateral loans played a significant role in helping patent-based innovative companies with insufficient collateral and low credit ratings secure necessary funds.

For example, Company A, a small and medium-sized enterprise, needed additional funds last year while conducting clinical trials for COVID-19 vaccine material development, but it became difficult to raise funds from commercial banks due to the exhaustion of loan limits.

However, by securing a loan of 2 billion won in operating funds using seven gene-editing patents as collateral, Company A was able to proceed normally with vaccine material development.

Distribution status of credit ratings for companies with intellectual property collateral loans last year. Provided by the Korean Intellectual Property Office

Last year, a total of 1,608 companies received IP collateral loans like Company A, of which 1,197 companies (74.4%) with low credit ratings of BB grade or below were able to raise funds at interest rates around 2%. Companies that would have found it difficult to even pass the bank's threshold under normal loan standards were able to obtain low-interest loans through IP collateral.

This advantage also resulted in a 2.5% increase in the total amount of IP collateral loans compared to the previous year. This was thanks to the active participation of private banks in revitalizing IP financing, with 68.5% of the total loan amount made through private banks.

Last year, the total scale of IP financial investment also increased by 66.8 billion won (35.6%) compared to the previous year. In particular, direct IP investments in promising patented technologies increased about fourfold from 11.3 billion won in 2019 to 46.2 billion won last year.

There was also a case where a small and medium-sized enterprise successfully attracted IP investments on its own, achieved localization of materials and products, and grew into a global company.

Company B, a small and medium-sized enterprise producing LED and semiconductor materials, succeeded in localizing materials by receiving investment from the Patent Account C Association in 2013 based on the value of its material-related patents. Since then, Company B demonstrated its strength by becoming the world's number one company in the field of materials for solar cells (TMA) as of last year. This is a growth ladder where investment is made solely based on the patent value held by the company, leading to the company's growth.

Park Ho-hyung, Director of the Industrial Property Policy Bureau at the Korean Intellectual Property Office, said, “As IP financing has entered a full-fledged growth phase, it is important that IP financing spreads autonomously within the financial market going forward. The Korean Intellectual Property Office will spare no effort to support this by providing high-quality IP valuation services to activate financial market funding support for innovative technology companies.”

This content was produced with the assistance of AI translation services.