〈日本知財学会誌〉Vol. 11 No. 2― 2014 : 66 83【Contributed Papers】-

Legislation Study on Patent Securitization
Mei-Hsin Wang（Fellow of Royal Society of Chemistry, UK/Associate professor, Intellectu-

al Property Office, Graduate School of Materials Science, National Yunlin University of Science &Technology）【Abstract】 In this article, important cases on intellectual property securitization abroad are examined to provide thefactors which make it successful. Furthermore, parties involved in the securitization supply chain are introduced
respectively together with legislated asset securitizations on real estate and financial assets. In addition, issues andsuggestions for future legislation are reviewed in order to decide whether the applications of the current forms of asset
securitization or a new special law shall be legislated to deal with the private fundraising and the commercial issues thatarise after patent securitization legislation is introduced. Finally, suggestions on patent securitization legislation areproposed and the specific properties belonging to intellectual property in order to be useable as security for fundraisingare explained. The foreign examples of fundraising and lending institutions are presented as demonstrative as to how
the mechanism and framework for implementation of biomedical patent securitization would operate. With the analysisof alternatives on legislation considerations, it is hoped this article will contribute to future legislation on intellectual
property securitization.
【KEYWORD】 intellectual property【Date of receipt】 2013.5.23

1.

securitization

fund raisingasset transfer【Date of approval】 2014.5.1

History of patent securitization

The securitized asset was “Zerit”-an anti HIV medicine that raised 115 million US dollars for Yale University.

Patent securitization is a form of intellectual proper-

In 2003, Royalty Pharma again involved in an

important securitization, this time involving 13 medi-

ty-based assets securitization which started in Unitedcines from several companies raising 225 million US

States in the 1970s.

dollars.

The earliest cases of intellectual

These two cases reveal the potential of, andproperty securitization involved copyrights in the mu-

demonstrate the successful models for, biomedical pat-sical and digital-rights fields by entertainers, such asents securitization.

David Bowie, James Brown, Ashford & Simpson, thePatent securitization offers new sources of funding

Other examples in-for patented technology while it provides-investment

clude the Italian film maker-Cecchi Gori (securitization

protection by off-set with tax. The patent owner does

Isely Brothers, and Iron Maiden.

of future movie income in 1999), fashion designer Billnot need to lose the whole patent right or accept unfa-

Blass (trademark securitization) and Formula 1 (secu-

vorable conditions simply due to a lack of funding.

ritization of trade mark, copyright and royalties).

Patent securitization also offers the following additional

The first example of patent securitization is thatwhich was underwritten by Royalty Pharma in 2000.

66

advantages for the capital markets :(1)A new financial product : a new option for inves-

ISSN 1349-421X© 2014IPAJ

All rights reserved.

This paper was duly reviewed and accepted by the anonymous referees who wereappointed by the IPAJ’s editorial committee.

Legislation Study on Patent Securitization

tors to broaden options for their investment portfolios.
(2)A simplified asset : investors only need to focus
on the securitized patent, patent pool or royalty
stream ; there is less need to worry about the credit
record, financial performance, operation or management of the IP owner.

and regulation made in particular for securitization on
intellectual property, such as :・National IP office announced “Patent Pledgee Registration Regulation.”・Joint announcement of “Guideline for Commercial
Bank to deal with Intellectual Property Rights” by(3)An asset with a risk management mechanism :National IP office, Bank Monitoring Committee, Na-

the system provides a vehicle that shields the IP as-

tional Industry Bureau and National Copyright Bu-

sets which have been securitized from the bankruptcy

reau.

of the IP owner.

The securitized IP is isolated fromthe owner, and there is a credit-enhancement mecha-

real estate and other assets2.
・National IP office authorized China Insurance com-

nism.

2.

・Patent securitization combined with stock options,

Current policy on patent securitization in Chinapany to insure intellectual property rights.

There

were 8 cities in BeiJing region chosen for 3 years’
trial run in 2012. Thereafter, 20 regions were chosen for patent insurance trial run to prepare the fu-

After pushing patent filing quantity, China has turned
the focus toward patent quality and the return on investment of Intellectual property rights.

Till the end

ture promotion in the whole China.
・China Technology Trading Office published《Patent
Value Analysis and Operation Menu》3 in 2012.

of 2012, there are 3,508,561 patents approved by China

・National IP office strategically worked with commer-

State IP office, wherein 503,538 patents (14.4%) arecial Banks, such as Bank of Communications to pro-owned by foreigners.

After joined PCT in 1994, PCT

vide financial support for intellectual property ser-filing through China has exceeded 80,000 cases, there

vices in 2011, thereafter, local governments andwere 18,627 cases filed in 2012 with 13.6% growthbanks followed to support small and medium enter-

rate.

prises.

China government considered licensing and securiti-

・National IP office promote education and administra-zation are the major index to reflect the usefulness intion services on intellectual property evaluation,

value.

fundraising and securitization.

Therefore, encouragements through policy to

There are 10 prov-

promote licensing and securitization are implemented.

inces, 5 districts and 8 high-tech parks involved in

Under China National “10-2-5” plan, “implementation

patent financial derivatives projects, especially inof securitization on intellectual property to stimulate

ChangSha where the very first federation on invest-

1

innovation” and the licensing registration system are

ing intellectual property was formed and aiming toboth mentioned.

improve the scope and efficiency on patent securiti-

The progress after the launch of li-

censing registration system in 2011 was modesty, only

zation.

10,270 licensing were registered and the total value

However, there are issues in China and the outcome

was 20 million US dollars till the end of 2012, theis rather different from the west.

growth rate was 5.1%.

However, securitization was

evaluation credibility, risk remote control mechanism

much welcomed by industry, the growth rate wasand credit enhance mechanism is not yet mature.

56.7% with 42 million US dollars in value within 22 tri-

The service provider to maintain the cash flow in com-

al area in China.

pliance with the securitization plan is not sufficient.

The difference could be due to the supporting policy

In China, patent

The service charge for patent securitization in China is67

〈日本知財学会誌〉 Vol.11 No.2― 201410-30% higher than traditional loan, while the ap-

medical patent securitization in Taiwan6.

proved capital was rather small, not to mentioned there

Another area in Taiwanese law that is ripe for legis-

are other professional charges, such as expert reports

lation is how to give a financial value on the intellectualand lawyer fees.

property being securitized.

Independent legislation for patent

In Taiwan, the Enforce-

securitization can be a need to resolve the previous is-ment Rules of the Estate and Gift Tax Act, Article 35

sues.

states that : “Unless otherwise provided for under3.

Current situation of patent securitization in Taiwan

other relevant acts or regulations, for the valuation of
intangible assets, the provisions under the precedingarticle［Article 34］shall apply mutatis mutandis.,”while Article 34 elaborates “The value of rights shallAs securitization is open to the general public, in or-

be determined according to the years remaining.”

der to avoid the fraud, inside trading and protect all
parties involved in the securitization and the general“……For mining and fishing rights, the estate and gift

public, legislation with tight monitoring is now a rec-tax shall be levied only in accordance with the provi-

ommended process, in particular after the financial di-sions set forth under the two preceding paragraphs.

sasters in Ice Land, Greek, Cyprus, US.

The trade name carried on by the business established

Traditional assets securitization is a creative financial product used to attract investors.

Patents are in-thereunder shall no longer be subject to estate or gift
tax payment.”7tellectual properties that can be securitized for cash
flow as long as accounting concerns relating to theThose provisions also provide examples as to how to

unique features from the intellectual properties (i.e.,

calculate the value of the patent rights within limited

the uncertainty of forecasting cash flow precisely, if weperiods of time and instruct that intangible assets shalllook at the bright side, there is possibilities for new

follow these principles if there are no other laws orlaunch/licensing in different countries to add on cash

regulations to be followed.

In addition, the ShiZi noflow/royalty ; if we look at the down side, there is also

536 comments from Taiwan grand judges meeting on

possibilities for patent revocation by third party or

28 Dec 2001 on this subject states that :“……the cal-withdrawn from the market due to unexpected side ef-

culation for the stocks from the non-listed or over-fects or compulsory licensing, etc.) can be understoodthe-counter companies are involved the tax burdens

and managed.

According to traditional accounting

on people, therefore, it shall be legislated according toprinciples, expenses and costs should be able to be

the law……,”8 thereby it further demonstrated the leg-listed on the balance sheet, however, Article 60 of theislation power to provide guidance on asset valua-Taiwanese Income Tax Act clearly states that “……

tion.

Business rights, trademarks, copyrights, patents andthe legislation with a framework by which it can value

other franchises are assets only if they are acquired byintangible assets, like biomedical patents.

These examples can be relied upon to provide

4purchase……,” meaning that patents developed internally can only be listed as research expenses and cannot be considered as assets on a company balance
sheet, while the other assets with an objective value
can5.

4.

Parties, processes and legal design involved in legislation of patent securitization

Therefore, how to amend the traditional ac-

counting principle for asset definition is certainly one

There are several players involved in the intellectualof the directions for legislation in order to promote bio-

property securitization process, including originators,

68

Legislation Study on Patent Securitization

the credit enhancement mechanism, credit evaluation(2)Invitation of professional advisors and parties toagencies, consulting and investment institutes, securi-

be involved in securitization process

ty underwriters and agencies, bonds underwriters and

It is impossible to have all the experts and parties

agencies, assets services institutes, and others, all of

from the very beginning of the securitization planning,whom play their particular role in making the securiti-

however, the core members involved in securitization

zation process a success.

should be invited to form a team early s so that they
can support the design of infrastructure and arrange

4.1.

Processes involved on securitization

the deal with legal documents.

The general process of intellectual property securi-(3)Information analysis

tization can be summarized in the following flow chart :While, initially, there will be a preliminary analysis

The securitization includes several steps that moreas to whether the securitization can be successful, ator less run simultaneously, however, the logical orderthis stage, a thorough analysis is performed the deci-is :sion to initiate the securitization process.

The histor-(1)Identification of the securitization target(s) andical analysis of the securitized asset(s), the environ-the process for the preliminary analysis of themental analysis of the target market and the wholeasset(s)economic situation are all taken into account for de-

The originator has to identify the needs for thetailed calculation, so as to provide as precise a forecast

asset(s) which may possibly undergo securitization andas possible.

preliminarily analyze them to decide whether the secu-(4)Refining the identified assets for securitization

ritization can be successful, and thereafter, to design

and process the auditing

the best infrastructure for the securitization according

In general, only an asset that can generate stable

to the needs from the asset(s).

Fig. 1

cash flow or can be converted into predictable amountThe flow chart of the general process for IP securitization

Identiﬁcation and investigationof the underlying asset

The establishment of special
purpose vehicle

Underlying asset transfer
Credit Enhancement

Securities issuance and sale

Credit rating

Identiﬁcation and investigationof the underlying asset
Based asset management andservices69

〈日本知財学会誌〉 Vol.11 No.2― 2014of cash is allowed for securitization.

The securitizedagency is hired to evaluate the designed infrastructure

asset(s) must be able to generate sufficient cash flow

for the securitization.

to cover not only the principal but also any interest andfound in the Taiwan Financial Asset Securitization Act,

Similar requirements can beservices charges and credit rating agency charges andchapter 3 : special purpose company, section 8, Arti-the credit enhance mechanism adjustments as may becles 85-899 for the business scope of the special pur-required during securitization.

pose companies in patent securitizations.

Decisions are also

made as to whether it is better to pool the assets at is-(7)Credit enhancement and circulation improvement

sue with other assets to diversify the holding and low-

In order to improve the credit rating and attract

After refining the se-more investors, the special purpose vehicle can under-

curitized assets, the originator will pool and partition

go the credit enhance mechanism to improve the credit

the assets according to similarity and process due dili-rating or the issuing conditions based on the advice

gence, reviewing documents to determine the intellec-

from the credit rating agency.

These measures are totual property rights of the pooled asset(s), auditing

ensure liquidation of the debts.

In case there may betheir administration and related security interest andtemporary cash shortfalls from the securitized asset(s),other obligations for the creditors.

er the risks involved therewith.

In any event, thethe third party (such as a bank or an insurance compa-

predictable cash flow income must be greater than theny) provides liquidity as a contingency, or a back-up ar-

overall costs to pay, including the principal, interest,

rangement for the special purpose vehicle to cash out

services charges and related expenses.

for paying the investors.

(5)Setting up special purpose vehicle and perform(8)Processing the credit evaluation and issue the se-true-salecurities

In order to shield the securitized assets from bank-

After credit enhancement, the special purpose vehi-

ruptcy, a true sale of the assets is essential to separate

cle hires a credit rating agency to provide an evaluation

the securitized asset(s) from the originator.

In theof the securitized asset(s) and announce the credit rat-

United States, this special purpose vehicle can be a

ing to be applied thereto by the Agency for the inves-

trust, a corporation, a limited liability partnership, or

tors’ reference.

any other legal entity, as long as it can perform the fun-the sale of these securities to investors for public ordraising purpose.

private placements.

In the end, the final choice will be

Thereafter, the underwriter arranges

determined mainly by the needs of the originator pre-(9)Obtaining income from the issued securities anddiction as to, whether the tax off-set and the purpose

pay the originator the agreed amountof this trading can be achieved.

Furthermore, theThe special purpose vehicle receives income from

special purpose vehicle must meet the requirement of

the underwriter and pays the originator the agree

being out of the control of the originator or theamount for its fundraising purpose.

patent(s) owner to shield them from creditors in the(10)Managing the assets with payment for the prin-case of bankruptcy to protect investors.

cipal and interest(6)Taking care of the trading structure and audit

The servicer manages the pooled asset(s) and book-from time to time internallykeeping profits from the securitized asset(s), some-

The special purpose vehicle and the originator willtimes even to pursue legal action if payment is delayed.

enter into a service contract whereby the originator is

The profits are saved in an account established by theto take care of the securitized asset(s), a trustee (ex : a

special purpose vehicle for this purpose. Upon matu-bank) is to be assigned to represent the investors, anrity, the special purpose vehicle pays investors theunderwriter agreement is prepared, and a credit rating

principal and interest then due.

70Legislation Study on Patent Securitization

4.2.

Parties involved on securitization

service providers, issuers, etc.

Securitization is a process wherein assets are turned

trust will play this role.

Normally the bank or

The issuer will entrust the

into securities, and relies on the participation of parties

security interest to the trustee12.

with various professions to be successful.

nancial Securitization Act, Article 77 states : “WhenBriefly, theparties involved are :In Taiwan, the Fi-

issuing Asset-Backed Securities, in order to protect(1)The Debtor(s)/Borrower(s) : the debtor(s) or

the rights and interests of the Asset-Backed Security

borrower(s) apply for the loan from the originator toholders, the special purpose company (SPC) shall ap-

generate the creditor’s right.

Thereafter, the debtor/

point a Supervisory Institution and shall enter into aborrower pays the originator principal and interest

supervision agreement with the Supervisory Institu-

based on a cash flow that the patent rights can be ex-tion in compliance with the asset securitization plan ;provided, that the SPC shall not appoint the Originatorpected to provide.
(2)The Originator : the originator is the owner ofthe securitized asset(s).

In return for capital, all orpart of the rights from the securitized assets are trans-

or Servicer set forth in the asset securitization plan as
the Supervisory Institution”.13 The supervisory institute protects the rights for the investors.

ferred to a special purpose vehicle for initiating and(6)The Credit Enhancer : in order to manage themaintaining the securitized intellectual property as acredit risk, the credit enhancement mechanism is often

pledge for a specified period of time. There is no re-applied to raise the credit rating and encourage invest-

10

course against the securitized asset(s) and the con-ment.

veyance process shields them from bankruptcy.

mechanisms : (i) internal credit enhancers ; and (ii)The

There are two types of credit enhancement

securitized asset(s) may be partitioned and pooled ac-external credit enhancers.

They are applied accord-

cording to similarities to permit stable forecasting anding to the request from the credit rating agency to pro-management of risks and to maximize profit genera-

vide the credit enhancement measures requested bytion.

the credit rating agency to maintain the desired credit

The originator is allowed to be the service pro-vider for managing the securitized asset(s) in exchange
for a service charge.

rating.
(7)The Credit Rating Agency : the credit rating(3)The Special Purpose Vehicle (SPV) or issuer :agency is the party that provides the credit rating forthe special purpose vehicle is the entity that takes overthe securitized asset(s) and suggestions for the risk

control of the securitized asset(s) to shield them fromcontrol management thereof, as well as the rating re-bankruptcy and that issues the securities (for example,

port used as a reference for the investors to judge

a subsidiary company or the institute of underwriters).

whether the particular pledge is secure to pay for the

The special purpose vehicle can be a trust, a company

principal and interest14.

or any other legal entity and depends on the local law

views the qualities of the securitized asset(s), the abili-

or regulation governing the situation, and the relevant

ties of the service provider, the financial performance11

tax off-sets .

In addition, its business scope should

be limited in order to simplify risk control.

The credit rating agency re-of the originator, the infrastructure of the securitization, the securitization process itself, how the credits,(4)The Investors : the investors are the final pur-etc., may be enhanced, and provides investors with allchasers of the securities, such as the bank, insurance

the information thereon for their references when ex-company, pension funds, investing company or corpo-amining their desire to invest in the securitization.

rate treasuries, and sometimes retail investors ;Example of such rating agencies with internationally(5)The Trustee : the trustee represents the inves-esteemed reputation, are Moody’s Investor Services,

tors in their negotiations with the credit enhancers,

Standard & Poor’s Corporation, Duff & Phelps and71

〈日本知財学会誌〉 Vol.11 No.2― 2014

Fitch IBCA.

The rating examples from Standard &that warrants the particular intellectual property secu-

Poor’s Corporation or Moody’s Investor Services canritization. Where the securitization of biomedical pat-be something like AAA (S&P) or Aaa (Moody’s).

Theents are concerned, licensors often have to meet mile-

minimum recommended investing ratings are BBB

stones for the securitized biomedical patent (such as to(S&P) or Baa (Moody’s). According to the Taiwan Fi-

pass the review of FDA or accomplishing a specificnance Asset Securitization Act, Article 102 : “The As-

stage of clinical trial or the development of dosage

set-Backed Securities or Beneficial Securities issued

form or even better an new indication which implies athrough public offerings to non-specific people by thebrand new market) to use this securitized patent for an

SPC or the Trustee pursuant to this Act shall be rated

additional cash flow.

by a credit rating institution with the recognition of thefrom the securitized patent will affect the credit rating,15

competent authority.”

The stability of the cash flow

Any legislation on biomedical

and if the servicer is able to not only sustain the cash

patent securitization should, in a similar fashion, man-flow from existing patent licensing, but to develop new

date the inclusion of ratings by such credit rating agen-licensing for the securitized patent, the cash flow per-cies.

formance will be better than that being stable because(8)The Underwriters/Placement Agents : the underwriter is often a security corporation and its duties
are to analyze the market, recommend the infrastruc-it is beneficial for the credit rating during the periodsof securitization17.
The concept mentioned above can also be seen in

ture, price the securities and suggest a public offerings

the Taiwan Finance Asset Securitization Act, is chapter

or private placements for the securities for the inves-

2 : special purpose trust, section 5 (Articles 34-36) :tors.

The underwriter may promote the trading andrights and duties for the trustee, and section 6 (Arti-

act as an arranger to integrate the comments from var-cles 37-42) : Calculation, tax and related issues for theious professions including legal, financial, tax and gov-

special purpose trust18.

ernment policy, etc16.

(10)The Professional Advisers : the professional ad-(9)The Servicer or backup servicer : the special

visors are the experts from those professions that are

purpose vehicle is to shield the securitized assets fromneeded to conduct due diligence and auditing. Exam-bankruptcy of owner or originator, and it will not nec-

ples of such people include legal counsel to draft theessarily to have the ability to manage or operate thelegal documents, financial experts, accounting advisors

securitized asset(s).

and patent experts experienced with biomedical

Therefore, the servicer/back-up

servicer will serve the role of managing and operating
the securitized asset(s) and allocating profits to the investors according to the securitization contract.

Incase the unexpected situation happens, such as poor

patent(s).

5.

Legislation among countries onpatent securitization

management or bankruptcy of the servicer’s core business which hinders the servicer to perform in the se-

There are arguments among countries whether ancuritization, a backup servicer will take over the duties

independent legislation for patent securitization is nec-

in the securitization.

essary, however, it can depend on the economic situa-

If patents are involved in the securitization, the ser-tion and culture and the advancement of intellectual

vicer monitors the patent licensor to insure fulfillment

property standard in individual country.

of the obligations and duties and to update the technol-

German may think it is not necessary, if European pat-ogy information in order to sustain the securitizationent office grant a patent, it is an asset if it is a valid pat-

operation, as royalties are often the main cash flow

ent, even it is in law suit afterwards, it can still be a

72

In Europe,

Legislation Study on Patent Securitization

technology.

For Americans, they share similar point

provide the system for assets conveyance to be regis-

However, in Asia, people are more familiar

tered, but if the case goes into the court, contract

with tangible assets and tend to be less confidence on

would be void unless it is recorded in the USPTO21.

intangible assets, although, both tangible and intangible

There are several theories discussing how to define

assets share the similar risks. Legislation is a dynamic

the assets conveyance in Japan.

process which reflects the needs of individual country

tem with a public announcement is preferred to protect

and world economic impact, or even political influence.

an innocent third party from double selling.

of view.

A registration sysThereIn Taiwan, patent securitization has not yet been

are several research companies receiving funding fromlegislated and the related legal issues can only be re-

the Japanese Policy Investment Bank by providing in-solved under the “Company Act,” the “Securities andtellectual property rights as financial guarantees 22,

Exchange Act,” the “Financial Asset Securitization

which indicates that intellectual property securitization

Act” and the “Clauses of the Real Estate Securitizationis already being used in the Japanese capital market.

Act.”

Japanese trust law was amended to accommodate in-

Based on the custom in Taiwan, a specific law andtellectual property rights in 2004. The other laws andregulation on patent securitization is highly recom-

regulations relating to application of securitization inmended for facilitating fundraising needed for the de-Japan are the Japanese Patent Act 23, the Japanesevelopment of patented technologies.

Bankruptcy Act (specifically Article 53 : Bilateral Con-

Like Taiwan, there is no specific law or regulation in

tract) and Civil Law Section IV Assignment of claims

the United States specifically concerning patent secu-

in Japanese civil law (specifically Articles 466-473),

ritization, with resort being made instead to the Uni-

which, in Article 469 states that :form Commercial Code and the Securities and Exchange Act being the primary legal bases currently“The assignment of any debt payable to order may not

used.

Nevertheless, the registration for conveying

be asserted against the relevant obligor or any otherthe intellectual property rights and the securitization

third party unless the certificate representing suchof thepatent rights are recommended as stated in theclaim is tendered to the assignee with the endorsement

35 U.S.C. 261 Ownership and assignment :19of the relevant assignment.”24“An assignment, grant or conveyance shall be void as

Which is reinforced by 466 (2) which states that :against any subsequent purchaser or mortgagee for avaluable consideration, without notice, unless it is re-“……where the parties have manifested their intention

corded in the Patent and Trademark Office within three

to the contrary ; provided, however, that such manifes-

months from its date or prior to the date of such subse-

tation of intention may not be asserted against a third

quent purchase or mortgage.”party without knowledge ;”In addition, each of the individual states that makeIn Taiwan, for the time being, the applicable law andup the United States its own law and regulation con-regulation to be applied for the issues involved in secu-

cerning registration and its effects.

ritization are the Patent Act, the Civil Act, the Compa-

According to Japanese Patent law in the Article 98, it

ny Act, the Securities and Exchange Act, the Trustsays “the following matters must be registered to take

Act, the Financial Asset Securitization Act, Clauses of20

effect : (1) the transfer…… of a paten right .

WhileUnited States recommend the registration process andthe Real Estate Securitization Act and the Bankruptcy
Act.

According to Article 6 of the Taiwan Patent Act,73

〈日本知財学会誌〉 Vol.11 No.2― 2014

the :for the innocent third party should be maintained, inview of the complicated patent right assignment in-“……patent right are both assignable and inheritable……In the case of taking a patent right as the subject ofa pledge, the pledgee shall not be allowed to put thevolved.

6.

patent under pledge into practice, unless otherwise pro-Overseas securitization cases
studies

vided for as a covenant in an agreement ;”There have been several successful cases involving
Furthermore, Article 62 states that :securitization of biomedical patents that can provide
models for us to refer to when examining different sce-

“The assignment, trust or licensing made by the paten-

narios involving this type of financial instrument. Se-

tee of the patent right of an invention to another person

curitization of single item sometimes can be with high-to practice the invention, or the pledge created on theer risk (such as case II in this article) as it is more

patent by the patentee shall not be asserted against any

vulnerable to confront the unexpected incidence fromthird party, unless it has been registered with the Pat-

external or internal changes, such as the policy chang-

ent Authority ;”es, new competitions or flaws.

Although it can beless vulnerable to securitize a pool of assets, however,
And Article 84 provides that :it adds on complexity to select appropriate assets,
more work on due diligence, negotiation, planning fi-“The grant, alteration, extension, prolongation, assign-

nancial structure and the whole process.

ment, trust, licensing, compulsory licensing, revocation,
extinguishments or pledging of an invention patentright as well as other matters which should be published, the Patent Authority shall effect such publicationin the Patent Gazette.”

25

6.1.

Case I : Securitization for investment indevelopment

The first case study we shall examine is a traditional
one involving a large pharmaceutical company : the Eli
Lilly securitization of Semagacestat for raising funds

Article 65 extends that principle to joint owners ofneeded for clinical trials.

patent rights (“A joint-owner of an invention patent

Eli Lilly, one of the top ten pharmaceutical compa-

shall not assign or entrust his/her share thereof to an-nies in the world, securitized Semagacestat for 300

other person or create a pledge on the same patent,

million US dollar through TPG-Axon Capital Manage-

without the consent of all the other joint-owners ;”)ment, LP and NovaQuest in order to raise funds for

The above mentioned articles in Taiwan show thatpaying Quintiles, a world class clinical trial organiza-

the law in individual countries is becoming internation-

tion, to perform clinical trials for two candidate drugs.

ally harmonized, since the concepts and principles in

For 300 million US dollars, TPG-Axon provided 90% of

the existing law and regulations are somehow similar

development funding while NovaQuest provided 10%,

to in the United States, Japan and Taiwan, although thebacked by royalties and milestone fees from three ofapplicable laws were legislated in different acts or

Lily’s Alzheimer’s dr ug candidates, i ncluding

chapters with minor differences to cope with local en-

Semagacestat.

vironment.

Regarding the conveyance of the intellec-

TPG-Axon Capital Management, LP (TAC) is a glob-

tual property rights, registration with the patent andally famous private hedge fund, providing services totrademark office is recommended and the protection

high tech individuals, pension funds, and banking insti-

74Legislation Study on Patent Securitization

tutions, its main interests are healthcare, pharmaceuti-

a guarantee for the securitization of 115 million US

cals, financial services, technologies, new energies,

dollars, including 57.15 million US dollars in senior

and basic materials and retails.

debt, 22 million US dollars in mezzanine debt andNovaQuest is a unique value-added-reseller (VARs)
and distributor.

The NovaQuest business is focusedon small-to-medium enterprises, providing expertisein industrial equipment, life sciences, consumer goods,
high-tech, CPG, and apparels.

22.16 million US dollars in equity, for securities thatwere awarded a single A rating by Standard & Poor’s in
October 2000.
The transaction was completed based on the trackrecord of royalties from 1992 to 2000, which had shown

This csae study shows that, even with a world classthat such compounds had a 24% compound annualorganization, knowledge experience and expertise, thegrowth rate. BioPharma Royalty Trust’s senior notes

securitizations are not guaranteed for, according to a 17

were due quarterly beginning from 6th Sept. 2000 to 6

August 2010 official announcement on Eli Lily’sJune 2006, supported by a strong legal structure, that26

website : Lilly has since halted further development

segregated the revenue stream, from the credit sup-of Semagacestat for Alzheimer’s Disease based on theport provided by subordinate debt and equity investors,

preliminary results of the Phase III Clinical Trials.

and the strength of the historical and projected royalty

This Semagacestat case thus also demonstrates therevenues provided by the Zerit patent.

need for various mechanisms used in securitization,

the excellent AAA credit rating was given because of

In addition,such as vehicles to shield the asset from bankruptcy

Bristol-Mayers Squibb Co.̶a leading international

and the pooling of assets to provide greater security

pharmaceutical company̶itself. The underwriter/is-

and higher guarantees for the buyer.

suer of BioPharm Royalty Trust was Royalty Pharma

For biomedical instruments and biomedical products,
they often requested to meet specific regulations from

AG and the senior holder was Westdeutsche Landesbank Girozentrale in London.

Food and Drug Administration office in individual coun-

Nonetheless, because this securitization was based

try, therefore, patent securitization offers patent owneron the patent covering a single product (Zerit), it car-an additional way to raise funding for patent related de-ried a risk inherently higher than in cases where sev-

velopments into product and an earlier manner to com-eral patents covering several products are involved.

pensate the prior investment and efforts.

This is because market conditions and assumptions ofcompound rates (and market share that a drug will6.2. Case II : Single technology from University
and marketer

The second case study we shall examine, that of the
securitization of “Zerit” by Yale University, points-up
the difficulties encountered with properly evaluating

achieve) can never be predicted with absolute certainty
and errors in the process become much more pronounced.
In the case of Zerit, this turned out to be the casedue to the following reasons :the royalty and income streams of drug and other bio-(1)Zerit was indicated for acquired immune deficien-

medical products and the problems that can arise whency syndrome (so called “AIDS”), and the majority ofthis evaluation is not properly made.

patients suffered from AIDS are from the developing

BioPharma Royalty Trust structured a securitization

countries that are normally unable to pay for the treat-of “Zerit” (Stavudine ; 2'-3'-didehydro-2'-3'-dide-ment̶a factor that was not properly accounted for inoxythymidine, d4T), which was protected by a patent

the valuation ;which was issued to Yale University and licensed to(2)Health reimbursement systems are different inBristol-Myers Squibb Co., that were to pay royalties asevery country and medications for AIDS are often too
75

〈日本知財学会誌〉 Vol.11 No.2― 2014

expensive to be covered by public reimbursement sys-

6.3.

Case III : Pooled assets from leadingtems̶again a factor that was not properly accounted

biotechnology and pharmaceuticalfor in the valuation ; andcompanies(3)Although the prevalence or incidence of the pa-

The third case study we shall examine points-up thetient pool was large based the health reimbusement

advantages of pooling assets to be securitized in pro-system worldwide, the available patent pool who canviding security and advantages for investors and toafford to pay for the drug was difficult to achieve 24%

avoid the problems that were encountered in the Zerit

compounding rate, ̶once again, a factor that was notsecuritization discussed in the previous case study.

properly accounted for in the valuation.

The current trend towards the securitization of pre-While, for Yale University, this was a successful se-

ferred pooled assets in order to prevent intentional or

curitization as Bristol-Mayers Squibb Co. paid royalty

unintentional errors or forecasting errors, such as

based on the licensing agreement and the funding

those that were seen in the Zerit case. An example ofraised from this particular securitization was thensuch a securitization was the Royalty Pharma Financeused for its intended purpose.

Trust’s 225 million US dollar securitization of variable

However, from the in-vestors point of veiw, the Zerit securitization was al-funding notes, structured by Credit Swiss First Boston

most in a risk to deliver the expected financial benefits

in 2003 with AAA rating by Moody’s and Standard &due to various factors, one of which was an overly opti-

Poor’s for a poll of drugs from various companies.

mistic assupmtion against 24% compound growth rate.

The insurance company was MBIA Insurance Group

Fortunately, this securitization period was only fromwhich was involved in the insurance of this securtiza-

2000-2006, otherwise, there would have been addi-

tion and the trustee was Deutsche Bank Trust Co.

tional downside for investors as the World Health Or-

Americas.

ganization subsequently announced a recommendation

This securitization involved a revolving borrowingthat Zerit was not suitable for initial treamtnment of

period of three years with a seven year expected matu-

HIV infection in 2009, which further limited it’s market

rity, in combination with quarterly amortization.

The

Furthermore, certificates permitting the intro-

special purpose vehicle involved with this transaction

duction of generic competition were granted by United

issued securities for patents covering a pool of 13

States Food and Drug Administration in the US market

drugs from various companies, such as-, Genetech’s

size.

29

further negatively impacting the drugs market share .

and Biogen Idec’s Rituxan®, Celegen’s Thalomid®,

Case I and case II both affirmed the merits of patent

PrePro® from Eli Lilly and Johnson & Johnson/Cento-

securitization, and prove patent securitisation is a newcor, Centocor’s Retavase®, Chiron’s TOBI®, Norvatis’

tool to generate the cash flow at a earlier stage, while

Simulect®, Roche’s Zenapax®, Ligand’s Targretin®

the trational think is limited on royalties or damages

Capsules, Memorial Sloan Kettering’s Neupogen/Neu-from ligitation.

Patent securitization can generate thelasta®, Organon’s Variza®, Glaxo Smith Kline and Ad-

cash in returnwhich is not necessary to be happened atolor’s Entereg®, Pfizer’s lasofoxifene® and Wyeth’s

the final stage, which we traditionally assume t be wait

Bazedoxifene®.

until patent is turned into a product and launched in
the market.

In January 2004, a portion of the royalty interest in
Neupogen/Neulasta®, which belonged to the Memorial
Sloan Kettering Cancer Center, added a further 263
million US dollars into the bankruptcy-protection vehicle and the investor insisted that there also be a 7 millionus us dollars investment in Royal Pharma.

76

At theLegislation Study on Patent Securitization

start of this transaction, the royalty assets were owned

6.4.

Case IV : Securitization through litigatedassetsby offshore company-Royalty Pharma AG, while, atclosing, the assets were sold to an Irish Trust, which

The fourth case study involves a case of where fund-

was a newly formed Delaware business trust estab-ing was sought for the IP assets in question, in orderlished for the purposes of providing the securitization

to enforce the very special IP assets that were the sub-with a shield from bankruptcy claims.

ject of the securitization : thus meaning that the very

Nine of the drugs were launched in the market within 5 years, with the patents involved having expiration

assets that were securitized were being put at risk by
their use.

dates that fell between 2005 to 2015. Performance of

Emtricitabine (FTC), a fluorinated version of lami-

this portfolio generated 4.4 billion US dollars in sales,vudine (3TC), was invented and patented by Emory

about 49 million US dollars in royalty and contingent

University, and subsequently licensed to Triangle

payment rights to Royalty Pharma AG in a calendar

Pharmaceuticals in 1996. Later, Triangle Pharmaceu-

year.

The licensees of the contingent payment rights

ticals was acquired by Gilead Sciences that completed

were owned by a diverse group of investment-tradedevelopment and secured market authorization for thecompanies.

This example demonstrated the progresson patent securitization, it starts to look for a pool ofassets instead of a single asset to minimise the risk

drug from the FDA on 2 July 2003.

Therefore, theright to market FTC was owned by Gilead Sciences.
Lamivudine (3TC) was marketed by Glaxo that had

and unexpected incidence which may bring in the neg-

obtained it when Glaxo acquired Burroughs-Well-

ative impact on securitization.

come.

Both FTC and 3TC were produced by a pro-

In case III, not every product was launched during

cess for the synthesis of BHC-189, which process

the securitization period, as there is always unexpect-which had been previously licensed by Emory to Bur-ed situation can happened, such as policy changes, na-roughs Wellcome prior to its acquisition by Glaxo.

tional emergency or cultural differences in individual

However, Emory claimed that Glaxo has improperly

countries, however, most of the risks shall be alreadyobtained the rights to the synthesis patent and to 3TC

evaluated with countermeasures to protect the parties

itself.

In case III, nine over the

Emory University filed an action against Glaxo forthirteen items in the pool performed much better than

the rights to the BHC-189 synthesis patent on the

expected to subsidize the less satisfactory items, and it

grounds that Wellcome had misappropriated the intel-

is acceptable that there are many factors to affect thelectual property of Emory’s inventors, and that the in-performance of a product management, no matter it istellectual property and patents covering FTC wereinternal or external factors.

originally from Emory University.

involved and the investors.

It is an improvement andIn addition, Emory

better measure comparing to securitization on only

University demanded the rights to the clinical trial data

one patent.

that had been generated relating to FTC.

Prior evaluation and due diligence forsubject patents in the securitization pool are the stan-

Emory also faced patent challenges on other fronts

dard procedures which are often handled by various

with challenges having also been launched by Shire

experts.

Pharmaceutical and BioChem Pharmaceutical.

Therefore, patents in case III with varieties(ex : vitamin, supplement, pain killer, osteoporosis,

In the end, Emory University was able to maintaincancer treatments……etc) and patent owners are orig-

the rights for both 3TC and FTC.

inally from international pharmaceutical companies ortized securitization by Emory University was conduct-

biotech companies to compensate or compromise all

ed during the ongoing litigation :possibilities.

The FTC mone-

1. February̶September 2004, Emory University77

〈日本知財学会誌〉 Vol.11 No.2― 2014

held internal discussions to monetize FTC and/or 3TC
royalty streams for securitization ;Lamivudine (3TC) is the only oral medication forhepatitis B, and there are more than 130 million people

2. October 2004̶February 2005 : Emory Univer-in China was still suffered from hepatitis B.

In thissity employed an experienced financial advisor fromcase, 3TC was demonstrated to be useful for a new in-Citigroup and Covington & Burling as outside legal

dication (to treat AIDS) which greatly increased thecounsel ;cash flow.

3. March̶June 2005 : Due Diligence process was
conducted with various parties ;We learn from this case how fierce compe-

tition can be in the pharmaceutical industry and how
the value of the innovation can be greatly compensat-

4. July 2005 : Emory University conducted final negotiations in New York, and sale contracts with aned.

Emory University was able to raise funds permit-

ting it to carry on for 6 years in litigation and received

Amended and Restated License Agreement were exe-quite a payoff in return.

cuted ;

as China excised a compulsory license based on the

However, dangers still exist

5. At the close of the transaction, Gilead and Royalty

amended Patent law, which was effective on 1 May,

Pharma paid Emory University 525 million US dollars

2012, and Lamivudine (3TC) was the first drug to be

for all FTC royalties.

possibly granted compulsory licensing which further

In addition, Gilead paid 15 mil-lion US dollars for amending and restating the license
agreement to Emory University ;enhanced the importance of FTC.
In case IV, it was a very courageous demonstration

6. Regarding the 525 million US dollars, it wasfor a university to sue a leading international company

agreed that Gilead and Royalty Pharma would pay 65%

for claiming back the rights, although it was throughand 35%, respectively, to Emory University and the In-

the help of competent external consultants, not toventors within 30 days of the closing date- July 21,

mention the securitization period went through the liti-

2005 ;

gation stage.

However, if due diligence has been well

7. Emory University and the inventors acquired aninvestigated, even the subject is inevitable to gointerest from Royalty Pharma approximating 25% ofthrough litigation, the investor will not be intimidated

the proceeds paid by Royalty Pharma during the trans-

as the risk shall be already predicted and evaluatedaction ; andwith the contingency plan in the risk remote mechan-

8. Gilead was obligated to pay to Royalty Pharma
royalty revenue based on future FTC net sales.

sim.

Furthermore, patent litigation is already a com-

mon tactic on business management, the patent which

This case was the largest sale of royalty interests to

can be in suit is always the technology with significant

date in the pharmaceutical sector, with significant in-value, competitors will attack whatever they can by all

terest from investors, sponsors and hedge funds.

means.

Universities can learn a great deal from theBased on the Citigroup’s profound knowledge for asset

case IV, cross professional cooperation with the inte-

management and potential buyers assisted valuation,

gration of external expertise, it may bring enormous

significant interest in the securitization was generated,

fortune for the university, also benefit faculties andwhich created competition to expedite signing andstudents.

closing.

Gilead’s stock went up about 3% (about 625

In case IV, it also proved that litigation is not alwaysCon-aiming for the final judgement, but often a tactic tosidering that Gilead’s costs was only 65% out of thetrigger the licensing or to force the counter party for

525 million US dollars (341.25 million US dollars), Gil-negotiation. Most of the patent disputes were settled,

million US dollars) on the announcement day.

ead was able to realize a profit of 283.75 million US

like the case IV, the outcome was based on the settle-

dollars on the transaction.

ment.

78

However, if Emory university in case IV did

Legislation Study on Patent Securitization

not file the law suit, nothing will be given to the university.

In this case, Emory university licensed themethod of BHC-189 synthesis both FTC and 3TC to

7.1.

Overseas Fundraising and guarantor
institutions

In Japan, Tetsuya Komuro securitized the future roy-

Burroughs Wellcome, which was acquired later on by

alties of his 806 songs from his music CDs in exchange

Glaxo, and Emory sued Glaxo for wrongfully obtain thefor a 1 billion Japanese yen from Fuji Bank30 in order topatent of its own.

Honest saying, it is too much has-buy digital music equipment and recording facilities

sles on litigation, there is no guarantee for the winningneeded to produce yet more songs and, presumably,

even with preponderance evidences, whoever with ex-

more revenue31.

perience on litigation can not deny that it can be a dra-

to sign the rights in the assets to an asset management

ma in the court.

company to manage the royalties for these songs in the

But universities are motivated to be

more aggressive on managing their intellectual property rights without doubts.

7.

Fuji Bank required Tetsuya Komuro

securitized CD.
In the United States, companies like IP Innovations

Recommendations

Financial Services, Inc. (IPI), exist whose core business specialized on intellectual properties evaluationand the raising of funds using this IP as security. As

Biomedical (including pharmaceutical) technologies

an off-shore company, Royal Pharm, is also specialized

require a huge amount of resources and time to main-on the securitization of biomedical patents, with sever-tain the intellectual property and fund the technology

al successful cases like Yale university on Zerit anduntil it reaches the market.28

many others biomedical patents.

Securitization is an in-

novative financial tool that offers a mechanism to link

There is also the need to execute Technology Es-

capital markets with intellectual property rights incrow Contracts for intellectual property to be acceptedsuch a manner that intellectual property rights are ac-

as a mortgage guarantee, in which the targeted intel-

cepted as pledges for fund raising.29 Adoption of char-lectual property is transferred to a custodian company

acteristics of the current Financial Asset Securitization

under the terms of an escrow contract which company

Act as the reference, it can be used for future legisla-verifies and evaluates and manages the assets32.

tion permitting intellectual property rights to serve as

true example of such an agreement was Norand̶aa basis for financial securitization for biomedical tech-software company with many valuable patents andnologies is recommended.

copyrights, which was acquired by a biotech company

The

However, comprehensive governance to insure

through the help of the custodian company in 1988, by

proper financial control is crucial, as it can be reckless-offering funding and deposit verification for the se-ly used and can trigger economic crises, if securitiza-

cured intellectual properties and accounting status re-tion is widely applied.

ports of Norand.

Certainly, it is unforgettable

regarding to this catastrophic recession caused by

In Taiwan, the government supports and provides

Lehman Brothers years ago, which caused tens of tril-

trust funds for small and medium size enterprises tolions US dollars lost and doubled the American national

pledge their intellectual property33.

debts with 30 million people out of jobs worldwide.

great expectation on biomedical patent securitization,

However, the deregulation of the financial industry ineven though it can be a sophisticated and costly mech-

United States for over 30 years gave opportunities foranism, it is one that offers enormous benefits and pro-the system to be misused, something which needs totection for the parties involved.

Considering thebe safeguarded against if biomedical patent securitization is to be successful.
79

〈日本知財学会誌〉 Vol.11 No.2― 2014

7.2.

Opinions from scholars

curitization Act as the assets mentioned in Article 4,

There are differing opinions as to whether legisla-paragraph 2 (car mortgage, house mortgage, rent,tion on patent securitization is crucial or whether thecredit card debt or payment receivable, etc.) presently

application on the current laws and regulations is suffi-

exist at the moment that the credit is extended as acient, since neither the United States nor European

creditor’s right. However, the cash flow to be securi-countries have specific legislation on patent securitiza-

tized is the anticipated royalty from the licensed con-tion.

Therefore, the following scenarios were re-tract or the future licensing contract that is based on

viewed to try to resolve these differences.

the intellectual property right. Thus, it is not present

7.2.1. Application of the current Financial

and certain.

Assets Securitization Act in Taiwan

Adoption of the current Finance Asset Securitization

This raises the issue as to whether the

future creditor’s right can be applied to the current Financial Asset Securitization.

Therefore, if the bio-

Act is one of the suggestions for biomedical patent

medical patents are to be covered in the current

securitization : the related monitoring from the gov-

Financial Asset Securitization, then an amendment ofernment can be provided for under Article 9 (apply, ap-

Part 5, Paragraph 2 in Article 4 must be made before

proval and registration) ; creditor right transfer andimplementation.

notification can all be provided for under Articles 5 and7.2.2.

An independent legislation on patentsecuritization

6, and rules regarding fees and tax off-sets are all provided for under Articles 38-41. Furthermore, securi-

For better implementation and to better encourageties offerings can apply special rules and risk manage-

the capital market, the establishment of legislation on

ment control and the trading expenses discount canbiomedical patent securitization is highly recommend-

apply, in a fashion similar to those applied to financial

ed34.

This new law can follow the framework of theasset securities. However, there are some limitations

existing Financial Asset Securitization Act and incor-

in these extensions of the law and regulations and so-

porate useful concepts of the Trust Act.

called “grey areas” would remain, such as the scope of

tized patent can be transferred to a trust during thethe rights of the originator, how to define assets, capi-

period of securitization, this mechanism offers the pro-tal restrictions, and operation models.

tection for the independence of the securitized patent

The securi-

Nonetheless, many scholars do not agree that intel-

and the wellbeing of the investors as the securitized

lectual property rights should be qualified as the secu-

patent will not be taken away by creditor if the vehicle

ritized assets.

According to the Financial Asset Secu-

gets bankrupted.

Furthermore, the rights for the in-ritization Act, the definition of assets includes suchvestors regarding the securitized patent will not be af-

things as rent, credit card debt, payment receivable orfected if inheritance situation aroused, such as theother moneywise creditor’s right in Article 4 (para-

owner passed away, or merger/acquisition happened ongraph 2, part 3).

the patent owner.

Thus, it would appear that intellec-

While it is inevitable that people

tual property may be qualified as a payment receivable

will debate whether or not the unique features of intel-

or other moneywise creditor’s right.

lectual property right and future royalties from the ex-

However, if thatis not the case, then consideration should be given to

isted licensing and future licensing means that biomed-

amending part 5 in Article 4-paragraph 2 of the Finan-

ical patents should not be considered as financial

cial Asset Securitization Act-to provide that intellectu-

assets, it is indisputable, that there are similarities be-

al property rights can be an option.

tween intellectual properties and financial assets which

Again, there are scholars who worry whether “future debt” can be adopted into the Financial Asset Se80

should justify their being able to be used as collateral
for the securing of funding35.

Legislation Study on Patent Securitization

7.2.3.

Author’s View on patent securitization
legislation

Flaws in the assets or unsatisfactory outcomes may
happen or only become apparent after securitization,

To provide better protection and safeguards for pat-

especially where biomedical or drug patents are in-ent and other intellectual property-based asset securi-volved, in that, there are many unexpected circum-

tization, a registration system for publicizing the trad-

stances, both scientific/medical as well as legal, which

ing and conveyance of the rights would appear to be

are beyond control of the parties.

essential.

For example, Zerit

The intellectual property right is autho-

was found not suitable for the initial treatment of HIV

rized by patent and trademark office, the maintenanceinfection which will impact the cashflow but it can not

status can be searched on line, but there is no compul-

be foreseen in advance, it could only be identified

sory enforcement.

based on later scientific finding with no fault during the

In the United States, the futurecreditor’s right is allowable for conveyance in the Uni-

due diligence stage of securitization.

form Commercial Code (U.C.C.), Article 936.

Howev-

example : “Sabril” was claimed to treat severe epilep-

er, registration of the security interest with an appro-sy for both children and adults but later on found to

priate authority is required procedure to claim thelead the blindness or serious sight impairment after

security right in the event that any dispute arises.

long term use ; for a while it was once a wonderful

In Taiwan, the supreme court case, 90 Tai-Sun-Zi,
no 1438, confirmed that the conditional creditor’s right37

Another tragic

remedy to control epilepsy during the clinical trials but
lead to many law suits afterwards.

Such scientific/

The registration system was orig-

medical problems include unexpected side effects on

inally established for recoding security interests in realminority of human being, low market acceptance, gov-

estate and financial assets.

However, such a registra-ernment policy changes (for example, compulsory li-tion system can be extended to provide a further pro-censing) and amendments to FDA regulations to namecan be conveyed .

tection for investors and help to prevent risk and dis-

but a few. Such legal problems include patent validity,

putes relating to the security interest and the rights oftrue inventorship (in the USA) and prior user rights

the various parties in the secured assets.

The futurethat only first arise during litigation and can provide

creditor’s right may be conveyed in Taiwan based onchallenges to the underlying patent rights causingthat supreme court judgment.

them to fail.

Therefore, the futurecreditor’s rights, such as the right to receive royalty

In the event of legal failures, securitization provides

based on future or existing licensing contracts should

investors with a measure of security in that, if the pat-be available to be securitized.
In particular, special attention on reviewing the licensing contracts of the targeted intellectual property
is required, in case they have a clause prohibiting their

ent rights are sustained and existed during the securitization period38,

the licensor is not liable for the loss

or damages on the future developments or outcomes39.
In the event of scientific/medical failures, investor

Since the beginning of the securitization

protection is provided by credit enhancement and risk

is a true-sale between the originator and the special

management mechanisms included in the securitiza-

purpose vehicle, sometimes a third party, such as ation infrastructure (such as the special purpose vehicle

conveyance.

trust, will need to be included in the securitization as aand vehicles to shield the assets from bankruptcy).

second special purpose vehicle for additional protec-

This is understandable in that there are various factors

tion for the securitized patents, in case their convey-that impact on the success of patent implementation,

ance is prohibited by the licensing contract of the secu-

such the qualities of the product (ex : made in devel-

ritized patent, which can lead to the failure of theoped countries vs. made in developing countries), com-whole securitization.

mercialization design, manufacturing standards and81

〈日本知財学会誌〉 Vol.11 No.2― 2014

marketing investments, macroeconomics, etc., andagainst which risk needs to be hedged.
All of the foregoing point up the need and advantages of providing “special-built” legislation to provide forthe opportunities and to minimize to the greatest extent possible the risks that patent securitization provides instead of merely trying to adapt existing legislation to do the task, so that government monitoring fora higher level of protection to investors and to theeconomy as a whole while providing innovators andcompanies with the benefits of access to funds for further innovation and development.

NOTE
1 “實施智慧財產權質押等鼓勵創新的金融政策”，中國十二五計畫，
http://www.aces.org.tw/wp-content/uploads/2012/10/
China125plan1.pdf, visited on 1 May 2014.
2 湖北改革專利融資模式 打造 “智慧財產權特區”, http://finance.
sina.com/bg/tech/sinacn/20120809/1216571870.
html , visited on 1 May 2014.
3 国家知识产权局专利管理司，中国技术交易所组织编写，專利價值
分析體系與操作手冊，知识产权出版社，2012, ISBN 9787513
017534.
4 http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=G0340003, 28 Apr 2012 visited.
5 See Liu (2006).
6 See Accounting Standard Measurement and Principle for
Intangible Assets in the no. 37 Standard Report for Finance and Accounting, p. 4, announced by Taiwan Accounting Research and Development Foundation on 20
July 2006, based on International Accounting Standard
no. 38 (IAS 38), effective from 1 Jan 2007.
7 http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=G0340072, 28 Apr., 2012 visited.
8 http://law.moj.gov.tw/LawClass/ExContent.aspx?ty=C&K
1=&K2=&K3=&CC=D&CNO=536, 28 Apr., 2012 visited.
9 http://law.moj.gov.tw/LawClass/LawAll.aspx?PCode=G0380122, 29 Apr 2012 visited.
10 See Schwarcz (1994).
11 See Chen, Lee and Lia (2002).
12 See Audino, Securitization : The Rating Agency Approach
to Credit Risks, Euromoney, 1996, p. 21.
13 http://eng.selaw.com.tw/FLAWDAT0202.asp, 28 Apr,
2012 visited.
14 See Teresa (2000).
15 http://law.moj.gov.tw/LawClass/LawContent.aspx?
PCODE=G0380122, 28 Apr 2012 visited.
16 See Chou (2003).
17 See Wang (2005).
18 http://law.moj.gov.tw/LawClass/LawAll.aspx?PCode=G0380122, 29 Apr 2012 visited.
19 http://www.uspto.gov/web/offices/pac/mpep/documen
ts/appxl_35_U_S_C_261.htm, 26 Apr 2012 visited.
20 Reviewer A’s comment.
21 See Huang (2007).
22 See Dynamic Fundraising on Intellectual Property, in theInvestigation Report of Intellectual Property Circulation
and Fundraising Cases Studies, by Economic and Industry Department, Dec 2007, p. 45.
82

23
24

See Ono (2011).
http://ishare.iask.sina.com.cn/f/12992168.html?from=like, 28 Apr 2012 visited.
25 http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0070007, 28 Apr 2012 visited.
26 See Eli Lily’s official website news on 17 Aug., 2010,
http://newsroom.lilly.com/releasedetail.cfm?ReleaseID=
499794, 20 Aug 2010 visited.
27 http://www.aidsinfonet.org/fact_sheets/view/414, visited on 9 Dec 2012.
28 See Grant (2001).
29 See Edwards (2001).
30 http://www.fujibank.co.jp/, 4 May 2012 visited.
31 See Liu (2004).
32 See Jeremy Lewis, Andrew Moore, Ensuring IP Protection
Through Escrow, 21 Entertainment and Sports Lawyer 8(spring 2003).
33 See Chen (2006).
34 See Tsuei and Chen (2005).
35 See Chen (2005).
36 See Wang (2002).
37 See Supreme court case, Tai-Sun-Zi no. 1438, http://jirs.
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