Leveraging Patents Financially – A Company Perspective

Abstract

This paper provides insights into one of the first in-depth empirical studies of how patents contribute to the external access of companies to financial sources.1 Based on expert interviews and a large-scale survey across company size clusters in technology intensive industries in Germany, the objectives of this empirical study are to examine: (a) the actual value and exploitability of corporate patent portfolios, (b) the actual relevance and extent of leveraging patents financially in external financing instruments, (c) the main factors of influence for companies to leverage patents financially or not, and (d) an analytical model with the factors of influence for companies to leverage patents financially or not.

Major findings of this study show that the financial utilization of patents in external financing instruments is widespread: 43.3 % of all responding companies stated to have experience in the utilization of patents in equity transactions and 20.0 % in the utilization of patents as collateral for bank loans. However, for the most part, patents are used as minor collateral and the utilization of patents as major collateral or in comparable functions as assets in sale/lease-back transactions or patent funds is marginal. The strongest motivating factor for companies to utilize patents financially is the exploitation of lying idle assets while the aim to increase the company's capital base or to decrease capital costs is less motivating. The strongest impeding factor is that a financial utilization of patents appears to be too complex and complicated compared to other funds at disposal. Other factors such as resource-based or reputation-based barriers are of less importance. The strongest impact on the probability whether a company leverages patents or not turns out to be the ratio of the patent portfolio value to the company value.

Keywords: Management@TUHH, Intellectual Property, Patent, financing, external financing

JEL Classification: A00