Your Intellectual Property Can Now Secure Credit. But There Is Work To Do

On May 10 2017, President Uhuru Kenyatta signed into law the Movable Property Security Rights Bill 2017, which will effectively make credit accessible to those in possession of movable assets such as livestock, vehicles and intellectual property.

One of the biggest hurdles facing creative enterprises today is access to credit. Not only because majority of businesses lack the traditional means of securing loans, but also because stakeholders (including creative industry practitioners) have been slow in interrogating how intellectual property can be used as security.

Valuing IP assets

While there are a number of internationally recognized methods of conducting IP valuations, lenders still grapple with significant challenges when it comes to its financing :

  • Valuing IP assets can be a complex, uncertain and time consuming task. Moreover, most lenders are equipped to undertake a comprehensive IP valuation
  • While the value of land can change over time, the value of IP assets can be subject to more dramatic shifts. A patent which protected a product becomes less valuable if consumer trends shifts or if the product is obscured by competition
  • Depending on the type of IP assets in question, the market can be limited. In a default situation, the value from IP assets that can be realized by a lender depends on how much a third party is willing to pay. In narrow fields, there may be a limited number of buyers, which could result in less returns for the lender

Complex and risky as it may seem, lending institutions will have to work around these issues if they are to remain relevant to the millions of young people joining the creative workforce on a daily basis.

The role of creative entrepreneurs

Even as financial institutions wake up to the realities of this new law, creative entrepreneurs have a major role to play in ensuring such a responsive credit ecosystem becomes reality.

When seeking IP financing, any lender – financial institutions, venture capitalists, angel investor etc –  will want to see some form of IP protection for the innovative product or service being offered by the entrepreneur. This could include copyright and related rights, industrial design, patent and/or utility models.

IP ownership thus becomes a prerequisite in convincing investors/lenders of the commercialization opportunities of the product or service in question.

The entrepreneur must therefore develop sufficient curiosity and possessiveness about their creativity, one that ultimately propels towards IP protection. Logically, this is where the chicken and egg story begins. It is where the tide will begin to turn in the love-hate relationship that exists between creatives and all things intellectual property.

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