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IP pledge financing, explained

The Chinese government announced a plan to increase protections for intellectual property rights this week, including more costly fines for violators. The state television report also touched on speeding up the patent application process and shortening trademark waiting time. In addition, the Chinese government will also reportedly begin promoting “IP pledge financing.”

What does “IP pledge financing” mean?

Generally, this phrase refers to the practice of pledging a company’s copyright, trademark, or patent rights as collateral for financial assistance. In the same way someone can guarantee real estate, equipment, or inventory to get a loan, a company can leverage its intellectual property for cash.

More and more corporate entities are realizing the potential of their IP as a financing tool, and IP pledge financing can help any size company quickly access more liquid assets. A company can sell its intellectual property assets at auction and gain more considerable sums than if they went the traditional route of licensing.

How will China promote IP financing?

China’s National Intellectual Property Administration (NIPA) will reportedly begin working with the China Banking and Insurance Regulatory Commission to help financial institutions become more receptive to IP pledge financing. Necessary actions moving forward will likely be establishing mechanisms for IP pledge loans, a credit approval system, and interest rate pricing specifically for intellectual property assets. NIPA officials hypothesize that such improvements will help small businesses and start-ups in China by offering them yet another way to raise funds quickly.

Understanding IP pledge financing can open up a whole new world of possibilities for your business. To learn more about intellectual property financing in China, consult with an attorney experienced in IP law for both the United States and China.

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