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September 23, 2021

Summary: Review Of The Intellectual Property Rights Regime In India (Parliamentary Standing Committee Report No. 161)- Section On IP Financing (pp: 38-45)

Author: Intern - Subhashree Jena

The Department Related Parliamentary Standing Committee on Commerce (“Committee”) presented a report titled “161st Report: Review of the Intellectual Property Rights Regime in India” (“Report”) in Rajya Sabha on 23rd July, 2021. The Committee, headed by Shri V. Vijayasai Reddy, reviewed various Intellectual Property related statutes, practices and regulations and recommended measures to improve the current landscape relating to IPR. It included a chapter on IP-based financing and discussed how the same can be implemented in India.

The Report highlights the nature of IP assets and the pros and cons of using IP as a collateral while raising funds. The Report mentions that as opposed to tangible assets, the value of IP keeps increasing over time whereas value of tangible assets either remains stagnant or depreciates. This makes IP-based assets a valuable means for credit and finance. The government too has given credence to this system in its National IPR Policy of 2016 wherein it pushed for valuation of IP-based assets and using it as collateral. But then the lack of awareness, lack of infrastructure for valuation and the fear of inconsistency associated with valuation of IP is preventing the Indian economy from adopting this system.

The Report highlights that SARFAESI Act already includes intangible assets in its definition of property, thereby putting in place the basic foundation for the system. Therefore, better implementation and appropriate amendments can help bolster the infrastructure for IP-based financing in India. The Report features the Chinese and Singaporean models for IP-based financing as illustrations for India to adopt. In the Singaporean model the burden of credit extended to IP-owners is shared by the banks and the government. Under the Chinese model, the government extends help to financial institutions that accept IP as a collateral.

The Report has made the following recommendations:

  1. Legislation needs to be put in place providing for uniform standards of IP valuation, mandatory maintaining of IP portfolio by businesses and spreading awareness about the effectiveness of IP-based assets as collateral.
  2. The Government needs to indulge in discussions with and recommendations from financial institutions and other stakeholders for creating a mechanism for governing and facilitating IP-based financing in the country. A specific legislation for the same needs to be brought in place.
  3. IP-based financing and transactions need to be promoted at the earliest by the government for rapid adoption of this system.    

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

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