125. The UK delegation expresses gratitude to the co-sponsors of this agenda item and the accompanying document. We are grateful to see this Council discussing a topic of high importance to businesses, especially MSMEs, and to the innovation and creativity ecosystem as a whole. We would like to thank the co-sponsors for entrusting us with giving an introduction, which we will do together with sharing experiences of the United Kingdom. We hope it serves as a catalyst for interesting conversation around the area of finance and intellectual property. The paper seeks to explore, in the context of the importance of financing to businesses, the different ways IP can be leveraged for growth and sustainability. It covers different forms of financing available, as well as potential support governments can provide.
126. Given this somewhat uncharted territory, the exploration in this paper poses a number of questions, and we look to others' experiences to perhaps provide some of the answers. These questions include: what are the experiences of businesses using IP to raise finance internationally; measures taken by Members that have supported businesses in their commercialization of IP; and how awareness of the benefits of IP could be raised with finance providers. Intellectual property assets have long been recognized as just that - assets. But valuing IP is not an easy task. For example, how much is your brand name worth after years of marketing. Valuing IP assets can be especially difficult if they are innovative - and therefore novel and untested.
127. Further, intellectual property rights may change in value over time. For example, a patent may become less valuable as other solutions to the problem may be found, or a trademark gain value as it becomes more widely recognized. These shifting values mean businesses will benefit from regularly taking stock of their IP assets - an 'IP Audit' - that will allow them to:
a. Identify the products and services that are crucial to business.
b. Identify IP assets and the legal rights associated with them.
c. Identify what market advantage these rights give.
128. …and thereby value IP assets as they would physical assets.
129. The world's five most valuable companies are worth GBP 3.5 trillion together, but their balance sheets report just GBP 172 billion of tangible assets - so 95% of their value is in the form of intangible assets, including intellectual property, data and other knowledge assets. Too often, IP-rich firms find it difficult to collateralize their investments to unlock future growth funding, especially when compared with those firms holding more conventional assets. So, we have to ask if there is a mismatch between the potential value created by companies with strong intellectual property portfolios and the investment opportunities afforded by investors.
130. In the UK, evidence suggests that there are fewer than 5000 IP valuation reports commissioned per annum, and the market is somewhat underdeveloped versus what might be considered optimal. It should be possible to bring more clarity to the subject of IP asset valuation so that investors and innovators can benefit from asset value as collateral for innovation.
131. The focus of government support should be to make it easier to maximize the return on IP through better knowledge, information flows, access to finance, insurance, and trading mechanisms, such as the UK government's IP for Investment toolkit and IP Audit programmes, for businesses seeking equity finance to grow: supporting identifying IP assets and their relationship to growth and providing guidance on 'investor readiness'. This could incentivise the creation of new ideas, increase the share that is commercialised, and thus contribute to innovative activity, which will benefit the wider economy through further innovation where firms are able to collateralise their intellectual property.
132. Whilst there are no easy solutions within this complex set of interactions between businesses and financial institutions, it's valuable to identify where potential obstacles lie and improving our understanding and use of IP assets as a fundamental driver of economic growth. For the UK, the growth in investment in intangibles, such as those protected by intellectual property, has been substantial. Between 1997 and 2016, investments in intangibles increased by 87% from GBP 71.91 billion to GBP 134.29 billion.
133. In 2016, almost half of the assets UK firms invested in were intangible knowledge assets, rather than tangible assets. There is no single market-wide or agreed methodology for valuing IP. Without a consensus approach, it is difficult to independently verify the value attributed to a piece of IP. Unsurprisingly, one survey [a 2010 survey] showed that only 3% to 4% of SMEs had ever tried to assess the value of their IP.
134. However, some innovative, independent companies in the UK are bridging the gap between financial and intellectual assets by developing their own expertise in valuation and its realisation - such as the UK-based commercialisation company, IP Group, which has focused on linking university-originated research with investors through carefully considered IP asset valuation and development. IP represents a global growth area, and those who are prepared to invest can prosper from this. We hope that others can join the conversation on how to further enable this for the future. Again, we thank other Members for their support, and look forward to hearing the views of other co-sponsors on their national experiences in this area.