Source: https://es.scribd.com/document/237194936/Securitization-of-Intellectual-Property-as-an-Innovative-Form-of-Alternative-Financing-3jmarshallrevintellpropli
Timestamp: 2019-04-19 22:33:18+00:00

Document:
Notice: Self-regulatory organizations; proposed rule changes: Integrity Funds and Integrity Money Management, Inc.
Citation: 3 J. Marshall Rev. Intell. Prop. L.
securitization is still a very feasible form of alternative financing.
product [or profit] of his effort.
Berneman J.D., LL.M., Professor Janice M. Mueller J.D., E. Calvin Golumbic J.D., Stephen E.
most importantly when to remain silent and simply listen.
BLACK'S LAW DICTIONARY 336 (6th ed. 1990).
into marketable securities for sale to investors). See generally Joseph C. Shenker & Anthony J.
more readily marketable . . . than ... the underlying assets").
attractiveness of all future royalty-based securitization.
represent their most valuable untapped assets.
this type will allow artists to better exploit their exclusive bundle of rights.
6 See Adler, supra note 4.
mind in which one can assert some ownership rights.
buyers. Id. Receivables are more liquid than inventory as they are one step closer to cash. Id.
earns $1 billion per year in patent royalties).
a loan most lenders and borrowers have no idea intellectual property can be used to do the same. Id.
are clearly the most important assets of most companies).
that will pay dividends for a fixed number of years until the bonds mature.
separating certain types of highly liquid assets from the risks associated with the asset owner).
which time the copyrights revert back to Bowie. Id.
in analyzing the credit risks associated with fixed-income securities. Id. at 458.
still a very feasible form of alternative financing.
based on the Napster model.
the opposite term is upload, which means to send a file to another computer").
each other and directly access files from one another's hard drives).
Secondary Market] (setting out the securitization process in four steps).
is united and then sold in the form of securities.
creates the asset subject to securitization.
reasonably predictable cash flow that can be used to raise funds.
involve the receipt of future payments are classified as receivables.
most important characteristic of the cash flow is predictability.
financial instruments backed by the cash flow from a pool of assets, such as royalties").
23 See Secondary Market, supra note 21, at 429.
funds are referred to as receivables).
26 See Secondary Market, supra note 21, at 429.
intellectual property asset sources like copyrights.
Course, Handbook Series No. A4-4447, 1994).
that he owned all of the copyrights to his musical compositions).
assets from the risks associated with the company. Id. at 134.
KENT L. REV. 947, 947-48 (1999).
removing the asset from the originator's bankruptcy estate.
of the assets from the originator.
interest rate is assigned to the securities.
by the income stream on the capital markets.
investors in order to raise funds to pay for the assets.
intellectual property into viable commercial assets, are the private equity markets.
acceptable risk for the investor.
for capital and start-up financing.
who now have the ability to sidestep the private equity markets.
'3 See Peter F. Culver, The Dawning ofSecuritization, 8 PROB. & PROP. 34, 34 (1994).
pledged as collateral, may be used to obtain bank financing").
3' See Schwarcz, supra note 31, at 947-48.
37 See Schwarez, supra note 31, at 947-48.
financing as well as a brief explanation of the securitization process).
'39 See Schwarez, supra note 8, at 151.
40 See Proposal, supra note 10, at 301.
11 Asset-backed securities are an increasingly prevalent way for financing business enterprises.
vehicle for financing and investment).
attention has been on the cash flow prospects of intellectual property assets.
prevalent in the entertainment, literary, and sports industries.
corporations and financial institutions have yet to readily capitalize.
E. What is A Bowie Bond?
securitization only applied to tangible receivables.
rather than merely selling off entire portions in order to just simply survive.
44 See Adler, supra note 4.
property right with a proven revenue stream could be used as the underlying asset).
modeled after the 1997 asset-backed Bowie Bonds securitization).
assets until the company is enduring financial difficulties).
5 See Schwarcz, supra note 31, at 947-48.
home loans, automobile leases, Small Business Administration Loans, and health care receivables).
(royalties) with presently available cash.
time in exchange for a lump sum of cash up-front.
into another traditional distribution agreement.
the neighborhood of three hundred copyrights.
"3A investment grade" rating of the bonds.
Company purchased the bonds and the deal ended up netting Bowie $55 million.
instruments backed by the cash flow from a pool of assets, such as royalties").
certain types of highly liquid assets from the risks associated with the company).
56 See Adler, supra note 4.
57 See Robert R. Veach, Jr., Securitization ofAssets, 30 MAR. BULL. BUS. L. SEC. ST. B. TEX.
, 8 See Bencivenga, supra note 29, at 5.
and the copyrights to most of his catalog of music dating back to the 1960's).
consisted of a 25 record catalogue).
including Space Oddity and Changes).
goenerally Berman, supra note 17.
one level above the lowest rating of "junk" bonds.
valuation was unproven in the P2P sharing and illegal music-downloading era.
already received his money up front.
determining whether a royalty-backed bond will be worth anything prior to maturity.
ability to adapt to new technologies").
in at the perfect time, before most people had ever heard of file-sharing).
1044 (9th Cir. 1999) for a detailed discussion on the structure of the Internet.
determines a bond's level of protection against credit loss).
supra note 17, at 463 (defining a junk bond as "an unsecured, unrated debt security").
sharing and illegal music-downloading era as demonstrated by recent steps taken by Moody's. Id.
artists in the event that a slump in sales occurs somewhere down the road).
bank loans based on using the intellectual property assets as collateral?
loan would, thereby making more cash available to the royalty recipient.
royalties if the consumers at some point in the future stop buying his music.
Pullman put together have an average lifespan of ten years.
distinct advantages over traditional bank loans.
security more attractive to investors.
the overall cost of financing is reduced.
provides a source of off balance sheet funding.
Schwarcz, supra note 8 (describing asset securitization and its benefits).
471, 475 (PLI Commercial L. and Practice Course, Handbook Series No. A4-4467, 1995).
76 Bencivenga, supra note 29 (stating that the bonds are for a 15 year period).
78 See Adler supra note 4.
7 See Schwarcz, supra note 8, at 137.
financing otherwise unavailable or at lower than traditional rates).
because their temporary benefit is offset by the corresponding obligation to repay them).
VILL. L. REV. 1097 (2003).
does not record the transaction as a liability on its balance sheets.
borrowing is available if needed.
by providing it with access to the capital markets.
financial condition is largely eliminated.
interests create genuine cost reductions.
85 See Schwarez, supra note 8, at 143; text discussion infra section IV.
financing strategies being discussed is securitization)).
hardest thing buyers and sellers have to overcome in regular intellectual property transactions).
securitization, there are some issues that hamper the full development of the market.
Another issue to consider is the overall cost to the asset holder.
cost also includes any transaction costs of intellectual property securitization.
the bond is established and sold, monitoring costs begin to accrue.
any structuring would even begin to take place.
bankruptcy, tax, and securities law as well as the Uniform Commercial Code.
used or may become customarily used as commercial security."
accounting, legal and risk based capital nuances of this activity.
(discussing small business financing and securitization possibilities).
costs and make securitization far more feasible and attractive to banks." Id.
continued viability of the borrower and will incur monitoring costs to further that interest").
reducing creditors' total monitoring costs).
97 See U.C.C. § 9-106 (2003).
Pullman type of bond structuring is the artist's copyrights.
utilization of ownership interests in the copyrightable subject matter.
person who actually owns the copyrighted work.
the enactment of the 1976 Copyright Act.
under the rules of the 1909 Copyright Act.
(2002); Lanham Trademark Act: 15 U.S.C. § 1060 (2000); Patent Act: 35 U.S.C. § 261 (2000).
involved herein include performing, licensing or selling the musical composition or sound recording.
consequence of a want of any individual competent to inherit").
Congress recognize separate copyright protection for sound recordings).
either in their original twenty-eight year term or already in or registered for their renewal term.
works of authorship created before 1978 could be renewed by an author's heirs.
has for the most part performed individually rather than collaboratively.
result, Bowie is usually the sole composer of the songs he records.
advise their clients with regards to the law of copyright renewal and termination).
105 See 17 U.S.C. § 24 (1976).
CLARA COMPUTER & HIGH TECH. L.J. 195, 223 (1999).
because it diversifies the risk inherent in an asset-backed income stream).
110 See Adler, supra note 4.
such, he possesses certain exclusive rights to exploit his copyrights.
filing a copyright registration in the United States Copyright Office.
by means of audio transmission.
represent a stream of royalty-backed income.
B.R. 194, 197 (C.D. Cal. 1990).
security interest with the United States Copyright Office. In re AEG Acquisition Corp., 127 B.R. 34.
intangible right as well as any royalty-backed income stream.
not in any way involve a transfer of ownership interest in the actual copyrightable subject matter.
copyrights was governed by federal law, while unregistered copyrights were governed by state law.
where the copyright is registered. Id.
period of time of more than transitory duration.
17 U.S.C. § 101 (2000).
illegal music downloaders purchased them.
market for copyrighted music by reducing compact disc sales.
A. Is Illegal Music Downloading Fair Use?
insulate investors from the added risk imposed by illegal P2P file sharing platforms.
In the Proposal section the author argues for such protective measures.
For securitization, a valuation assessment and calculation is first necessary.
117 See Napsterl, 239 F.3d 1004.
markets for the work. Id. at 1016.
for or value of the copyrighted work.
121 See Pub. L. No. 105-304, 122 Stat 2860 (1998) as codified in 17 U.S.C. § 512 (Supp 1999).
122 See 17 U.S.C. § 101 (Supp. 1999).
future cash flows") Id. at 3.
data are an important component of the valuation of all music royalty rights").
revenue-generating history in order to be a successful securitization.
artist with a one-hit-wonder off of their twelfth album.
then assessed in consultation with rating agencies such as Moody's.
which a catalogue is diversified is also a factor in predictions of future revenue.
Predictability is a key indicator of future revenue stream risk.
predictable cash flows are the best aspirants for an asset securitization.
prerequisite for intellectual property securitization.
artist receives a lump sum of money up-front as opposed to a later, slower payment.
based on the same existing methods used in the valuation of tangible property.
the life of the securities").
one hit wonder. Chumbawumba, Tubthumper, on Chumbawumba (Universal Records 1997).
129 See Jackson, supra note 9, at 197.
history of steady consistent cash flows are the best candidates for asset securitization").
134 Id. See generally Ted Hagelin, A New Method to Value Intellectual Property, 30 AIPLA Q.
property asset is often not provided for.
is given non-exclusively to multiple parties.
136 See Valuation, supra note 133, at 7-8.
matter of fact [where as] accounting net income is a matter of opinion.
are the most consistent, predictable and certain valuations for intellectual property assets.
is then divided by a "capitalization rate."
Valuation supra note 133, at 7.
economic value approach to valuing intellectual property assets).
of present value as if it were going to buy or license the intellectual property asset).
the intellectual property owner." Id.
assets in the stream of commerce.
first blush, this approach's failings are relatively self-evincing.
property assets simply because rarely are the cost and the value the same.
otherwise predictable future royalty stream.
144 A general example would be the S&P or simply Wall Street.
bankers and others are taking intellectual property more seriously).
research and development expenditures or outright acquisition outlay).
valuating tangible assets, it is of little use in valuing intangible intellectual property style assets).
no longer a truly bankruptcy remote structuring protecting the investors.
of the artist negatively affecting the value of the securitization.
noted above, this will not actually affect the artist who receives his money up-front.
regarding valuation of intellectual property for securitization and bond issuances.
credit enhancements at the time of the structuring.
determining if they have [successfully] legally severed their client from the asset to be securitized).
books; and (v) the expressed intent of the parties.
with a consistently performing tract record of ten years. Id.
originator and can be structured as simply as an escrow or cash reserve account.
greater guarantee that the bonds will mature ten to fifteen years down the road.
group like Moody's and in turn more investor interest and confidence.
downloading from diluting otherwise predictable securitized future royalty streams.
tranches protect tranches by absorbing losses on the underlying receivables.
Bar of the City of New York, Structured Financing Techniques, 50 BUS. LAW 527, 550.
159 An appropriate example would be the aforementioned over-collateralization.
Intellectual Property Rlisks, 17 CARDOzO ARTS & ENT L. J. 321, 326 (1999).
entity were attempting to ensure the entire securitization transaction.
intellectual property rights instead of having to sell them.
employing the appropriate credit enhancements will help to broaden its use.
stream could potentially be used as the asset source in a securitization.
[as a technique whereby medieval chemists turn base metals into gold] that really works").
property asset-backed bonds in late 1997).
libraries, book publishing rights, and licensing and endorsement agreements").

References: § 9
 § 1060
 § 261
 § 24
 § 101
 § 512
 § 101