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Intellectual Property as a valuable asset

You can pledge Intellectual Property as the form of security to borrow money from the banks!

 

Lok Choon Hoong
Lok Choon Hoong

Lok Choon Hoong shared his expertise during the 1 ASEAN Entrepreneurship Summit 2015 on November 20th at a workshop catered for angel investors.  Below is his presentation base on editor’s summary and is only for general reference purpose.

What is Intellectual Property?

Intellectual Property (IP) protects new Ideas and creativity. As many new startups are actually founded on ideas and creativity, these ideas and creativity can actually be owned at the form of property if it goes through certain registration processes.  Although it is intangible in nature, but it is an asset recognized by the law.  In fact, in Malaysia and Singapore, you can pledge Intellectual Property as the form of security to borrow money from the banks.  So it shows that IP is recognized as asset.

It has to have certain unique selling proposition.  The Unique Proposition can be the new functions, new brand or certain expression that make the product different or unique.  The idea of Intellectual Property is actually to protect the ideas and creativity of the creator(s) from the competitors.   This is the only legal barrier of entry that ones can have under the law, and to prevent the ideas or creativity hijacked by other competitor(s).   So, having a proper legal barrier of entry is important for investors who want to invest in the businesses.

The different forms of IP:

  1. Patent: Protect new technological breakthrough or innovation in product.

  2. Brand: Protect the goodwill associated with the business. The way to do it is through trademark such as logo, slogan and others.

  3. Industrial Design: Protect view shape for the creative design.

  4. Copyright: Protect expression.

3 Reasons why is IP relevant to Angel Investment

  1. IP is a very important security for investors to put their monies into a new startup.

  2. IP provide an important legal barrier of entry. This is to prevent others from coming into the market and to have freedom to operate the business.

  3. IP is a very significant asset for startup companies.

Main IP considerations:

  1. The IP and type of IP that the company owns.

  2. Registration of the IP: For IP owned by the company, is it registered or pending?  There is a main difference between Pending Rights and Registered Rights.  When the rights is pending, the real scope of protection is unknown.  Due diligent is recommended in this case, to get to know more about the extent of the IP rights.   For patented technology, investor(s) will need to know the claim of the particular patented technology.

  3. The geographical coverage of the IP: It is protected by local jurisdiction. For example, an IP registered in Malaysia is only protected in Malaysia.

  4. IP protection sufficiency: To check if the IP protection is sufficient to cover all relevant aspects.  All these are determined by the claim and scope of protection.  Thus, investors are advice to do due diligent on the cope of protection and its relevance.

  5. Cost of maintenance for renewing IP.

Other issues relating to IP ownership:

  1. Is all the IP registered in the name of the company or founder? Having the IP filed in the name of the company invested is important.

  2. Is the IP developed after the current company formed or during previous employment at other company? Anything developed during the previous employment belongs to the ex-employer.

  3. Is there any restriction with license to exploit the IP? The IP might be pledged already to the bank and the bank will have certain authority or terms relating to the IP, such as restriction on the freedom to license or sell shares.

  4. Sometime the IP can come from the university. There is certain collaboration terms with the university involved. Invertors urged to aware on these terms.

  5. Employee owned IP is another issue because if the IP is co-owned by two or more parties, in Malaysia, one party can exploit the IP without the consent of the other owner(s), but cannot license it. Thus for co-own IP, investors are advice to have an agreement with the third party to determine the methods to exploit the IP.

 

 

About the Presenter:

LOK CHOON HOONG

Treasurer of Malaysian Business Angel Network (MBAN)

Managing Partner of Pintas IP Group

 

All editorial content are owned by respective intellectual property owners and are protected by applicable copyright laws.  Re-use of any part of the content for commercial purposes without permission is strictly prohibited.

© 2015, Monde Journal.

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