Seeing the value in great ideas

Beijing Qiyi Century Technology, a copyright service provider, issued an intellectual property supply chain security at Shanghai Stock Exchange in late December, marking a key step toward IP assets' securitization in China, industrial experts said.

The first of its kind in the country, the issuing of the IP asset-backed security is of significance in encouraging innovation, they noted.

Asset-backed securitization is a type of financing dependent on a pool of specific assets, He Jun, an associate professor from the Graduate School at Shenzhen, Tsinghua University, told China Intellectual Property News.

The security, worth 470 million yuan ($68.74 million), is backed by IP assets including copyrights, Xiao Chao, head of the Hainan provincial IP administration, told Hainan Daily.

Qiyi Century, headquartered in Beijing and founded in March 2010, has set up a branch in Hainan. With the support of the Hainan provincial IP administration, the company became the first issuer of the IP security.

"The issuance is a crucial step in Hainan's path to exploring IP securitization," Xiao said.

The issuance marks a milestone in the country's IP securitization, Li Dongya, general manager of an IP operation company in Shenzhen, Guangdong province, was quoted as saying by China Intellectual Property News.

The combination of IP and finance has led to new financial products and business models, including IP-collateral loans and the use of IP for investment. In comparison, the IP securitization is an innovative business, which is expected to bring a dramatic change to the IP field, Li said.

Li's views were echoed by He Jun; he said that the green light given to the security shows that IP can be used as an underlying asset to raise funds, which will help creative businesses - generally content makers such as film and TV studios - to expand financial channels.

Yet the securitization requires high-quality copyrights as underlying assets, he noted.

Uncertainties and risks in the market also need to be taken into consideration. They could be controlled by a regulated securities rating system and a stringent IP enforcement environment, he added.

For the IP intended as underlying assets for securities, their quality and market prospects are key items to assess, he said.

Only those that the market expects to yield steady cash flows can be counted on as underlying assets, he noted.

Securitization can increase IP assets' liquidity and is thus becoming a new trend in the IP sphere, added He.

While the security has given some uplift to the industry, experts also expressed their concerns.

China's IP securitization is still in infancy, Li said.

The authorities and the industry are exploring the development of its business models and markets. There is still a long way to go before a fully fledged system comes into operation, He added.

"The key to the IP securitization lies in the rules and regulations' formulation, implementation and supervision."