135. The Swiss delegation would like to thank the UK for introducing document for the Council's present discussion. Switzerland is pleased to co-sponsor the agenda item, as well as the written submission. This document shows that financial capital can originate from various sources and take different forms, ranging from debt to equity. Some types of financing may be more appropriate than others depending on the stage of development of the IP protected innovations and creations. Nevertheless, financial capital is generally an important component at each stage of the innovation cycle, as it influences not only the transition from an idea to an innovative project, but also the creation of an IP asset and the commercialization of the finished project.
136. The interplay between IP and financial capital is already evident at the very beginning. To turn an idea into an innovative project, financial capital is not only desirable but often a prerequisite for this to happen, as the inventors/creators often lack own funds. This is especially true for micro, small & medium enterprises (MSMEs). In order to tap investment opportunities, it is therefore of utmost importance to convince investors that their financial contribution will not be in vain or fall into the wrong hands. Thus, the fact that an innovative project is eligible for IPR protection and that a company is able to secure this protection is a signal to potential investors that an investment could be worthwhile.
137. Once an innovative project is accomplished, it is important to have it protected in order that the full benefits accrue to the inventor/creator. However, small companies often shy away from this step, not only because of a lack of awareness regarding the importance of IP but sometimes simply shy away from the initial administrative effort required to apply for an IPR or the costs involved in the granting procedures. Consequently, financial capital plays a role not only in the elaboration of an innovative project, but also in protecting its continued existence.
138. Established IP assets can signal quality, productivity and commercial potential to investors. This is particularly so in the case of MSMEs, as the investor is provided with evidence that the company's business plan is backed up by a possibly valuable asset. This finding was confirmed by Bloom Bio-renewables, a Swiss start-up that our delegation featured at the March 2021 TRIPS Council for the IP and Innovation topic "Making MSMEs Competitive in Green Tech". This young innovative business explained that in its own case, IP was necessary to assure investors that the company is able to defend itself against potential illegitimate free riders. Thus, the interplay between IP and financial capital becomes clear once again, this time with IP serving as a trigger for the acquisition of financial capital.
139. Finally, the ultimate objective in developing IP is to generate positive returns, including through licensing agreements, for both the inventor/creator and the investor. Thus, financial capital again is essential to exploit the possibilities at hand to finance market research, pilot testing and the full commercialization of IP assets.
140. Financial capital is therefore an important consideration in the innovation cycle as it affects each stage of the innovative process and is directly linked to the development of the IP protected innovations and creations. This topic is particularly relevant for small businesses and there is much room for further analysis. Therefore, Switzerland is currently cooperating with WIPO for a project to explore the possibilities for SMEs to use IP assets to access funding to shed further light on this important subject.