Intellectual Asset Funding

 

Jane Lambert

Intellectual assets are the creations of the mind that give a business a competitive advantage over all others.  Examples include inventions, computer programs and goodwill.  They are not to be confused with intellectual property such as patents, copyrights and trade marks which protect them.

For many businesses, intellectual assets are their most valuable property.  However, their value has not always been appreciated.  Recently, lenders such as the NatWest Group have begun to accept intellectual assets as security for advances.  For instance, the NatWest Group teamed up with Inngot Limited to launch an IP-based lending proposition for high-growth businesses (see NatWest launches Intellectual Property-based lending to fuel high growth businesses 12 Jan 2024, NatWest website).

Following the former Chancellor's Mansion House speech, the British Business Bank announced a £6.5bn uplift to the Growth Guarantee Scheme to unlock further lending to smaller businesses over the next four years and up to £500m of ENABLE Guarantee capacity ringfenced over the next 12 months to support Intellectual Property-rich smaller businesses (see British Business Bank welcomes Chancellor of the Exchequer’s announcement of package of new measures to support smaller businesses 12 July 2026).

In that press release, the British Business Bank observes that many innovative businesses have significant value in intellectual property but lack the physical collateral that lenders traditionally rely on, which makes it difficult and prohibitively expensive to access debt finance.  Recognising this, the British Business Bank is making up to £500m of existing funding capacity available over an initial 12-month period to support lending to IP-rich smaller businesses. That is expected to help increase the availability of finance for IP-rich businesses, enable more competitive pricing and develop stronger lender capability to assess IP-driven business models.

The value of intellectual property rests ultimately in its ability to prevent unfair competition and resist applications for revocation and invalidation.  These matters are decided ultimately in the courtroom.  The persons best placed to advise on the likely outcome of infringement and invalidity proceedings are the advocates who would have to argue those points before judges and hearing officers.

Anyone wishing to discuss this article may call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form at any time.

British Business Bank

The most interesting session at this year's Venturefest Yorkshire was From Concept to Commercialization a panel discussion chaired by Nigel Walker of the Technology Strategy Board. One of the members of the panel was Ken Cooper of the British Business Bank ("BBB"). As I had not heard of the BBB before I buttonholed Mr Cooper on his way out and asked him to tell me a little more about his institution which is described as "a state-backed economic development bank" that supports "economic growth by bringing together public and private sector funds to create more effective and efficient finance markets for smaller businesses in the UK."

Surprisingly the BBB is not a throwback to the days of Harold Wilson or even Gordon Brown but a creation of the present government.  Paragraph 2.116 of HM Treasury's Autumn Statement 2012 contained the following statement:

"Business Bank – As announced by the Chancellor and Secretary of State for Business, Innovation and Skills in September 2012, the Government will create a Business Bank. It will deploy £1 billion of additional capital to stimulate the private sector market for long-term capital and address structural gaps in the supply of finance to SMEs. As part of this, the Government will co-invest at least £300 million over the next two years, alongside private investors, in channels that will help diversify the sources of finance available to SMEs. The Business Bank will bring together under a single institution the strategy, management and communication of existing government finance schemes for SMEs. In addition, the Government will also seek to bring government-backed business advice services closer together, harmonise their engagement with customers and coordinate them closely with finance interventions, to improve accessibility for SMEs. A number of the Business Bank’s functions will be operational from spring 2013, with the institution becoming fully operational in autumn 2014. The Secretary of State for Business, Innovation and Skills will set out further details later in December 2012."

Mr. Cooper told me that the BBB is at present merely a programme within the Department for Business, Innovation and Skills ("BIS").  It is not yet authorized or regulated by the Financial Conduct Authority or the Bank of England. However, Her Majesty's government has applied to the European Commission for confirmation that the BBB will fall outside the prohibition of art 107 (1) of the Treaty on the Functioning of the European Union. Should HMG's application be successful the programme will be transferred to a public company by the name of the British Business Bank Plc which will provide various types of financial support for small and medium enterprises ("SME").

BIS expects to unlock up to £10 billion of extra funding for SME over the next 5 years and it has set out how it intends to achieve that objective on the "What we do" page of the BBB website. Rather more detail is given in a presentation dated Fed 2014 entitled "British Business Bank Unlocking Finance for British Business."  The presentation notes that SME in the UK invest far less than their competitors in other EU countries and a number of reasons have been identified as to why that is so. These include

• High market concentration - It is said that there is a highly concentrated market for smaller business lending in the UK, which leads to lack of diversity of financing choices for smaller businesses
• Viable smaller businesses are not being served well enough
• Capital constraints on lenders, and
• Lack of longer term development capital.

The BBB proposes solutions for all those problems. Thus the problem that smaller businesses are not being served well enough will be met by debt programmes, start-up loans, enterprise finance guarantee, equity programmes, enterprise capital funds ("ECF"s), ECF Venture Capital Catalyst, Business Angel CoFund, UK Innovation Investment Fund and the Aspire Fund.

In his talk in York on Thursday Mr Cooper spoke a little about the Angel CoFund which was created with a £50 m grant from the Regional Growth Fund in 2011. It is a £100m investment fund for promising UK businesses and it is intended to help develop business angel investment in this country. The Angel CoFund works very closely with other business angel networks which are represented by the UK Business Angels Association ("UKBAA") and indeed Mr Cooper is a member of the board of UKBAA.

One of the topics discussed that was discussed for some time on Thursday was intellectual property. Nicole Ballantyne of the GrowthAccelerator and PERA Consulting who was also on the panel said that many businesses were unaware of the IP that they already owned much of which could be converted into revenue. She mentioned an IP audit scheme and spoke of the need to protect IP. When the discussion was opened to the floor I rose to point out the distinction between intellectual assets and intellectual property and that businesses can actually ruin themselves by spending too much time, effort and money on patents and other registered rights that they do not need.

Anyone wishing to take advantage of those programmes, whether as inventor, entrepreneur or investor, will need first class advice not just onIP but also on tax. Uniquely our chambers can provide both.  My colleagues and I in our IP, Technology and Media Law Group can advise on IP strategy, patenting and the like and our colleagues in Atlas Tax Chambers which includes Anne Fairpo can advise on such matters as the patent box and other incentives. Should anyone wish to discuss this article or out services generally, he or she should call us on 020 7404 5252 during office hours, fill out my contact form, tweet me, write on my wall or get in touch through G+, Linkedin or Xing.