JBA & JIPO partnering to create IP collateral framework
The headquarters of JIPO in New Kingston, Jamaica

The island's banks are seeking to leverage the earning potential of intellectual property (IP) and are working through the Jamaica Bankers Association (JBA) and the Jamaica Intellectual Property Office (JIPO) on a pilot project to execute same.

According to the World Intellectual Property Organization (WIPO), IP refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.

In an interview with the Jamaica Observer, president of the JBA Septimus Blake said, “When I think about intellectual property in the First World and even in other places, royalties for music can be securitised and a value can be put on it. In developed markets that's a deep and well-developed space. I'm saying that can come into our space and we as banks are taking a look at intellectual property as a source of income and testing what kind of framework we need.”

He said, “You have many musicians in Jamaica who would have registered music as their intellectual property and on a frequent basis they get royalties from that music.”

As a part of the pilot project, Blake revealed that consultants are also being brought in to provide guidance on how to build out the initiative in Jamaica.

“We're also getting expertise to contemplate it in the banks and we're also looking at all of the other components which need to be in place for it to be viable. But I suspect that this intellectual property is a source of opportunity and I expect that you're gonna see some innovation around that space,” said Blake.

According to a report published by the International Training Centre of the International Labour Organization (ILO) in 2016, “The number of patents pledged as collateral grew from less than 10,000 in 1995 to nearly 50,000 in 2013. According to an IP merchant bank, Ocean Tomo, intangible assets as a percent of market value are at an all-time high of 84% for S&P 500 companies.”

While the concept of collateralising IP is fairly new to Jamaica's financial sector, Blake outlined that it has been gaining popularity on the international scene and has proven to be a safe asset class with an established secondary market.

“The lack of reporting financial structures makes the IP look insurmountable but I'm saying that there are opportunities to put those financial frameworks in place to allow us to leverage the potential of IP. For example, in more developed markets you see them being sold from time to time, so you have options. You'd have heard from time to time where Motorola would be selling blocks of patents in the billions of dollars. So, they have a portfolio of patents which they sell from time to time, you would see quite a number of securitisation against intellectual property, some of it specifically related to music or literary works. You're seeing direct selling of those so it's about us looking at what are the areas that we need to strengthen and put in place to facilitate it,” Blake explained.

The ILO report further highlighted that “Since 1980, 16% of all US patents have been pledged as collateral before their expiration and by 2013, 40% of all firms with patents outstanding had pledged their patents as collateral at some point.”

Additionally, for many technology firms, these IP rights have become their most valuable assets. The rise of companies such as Apple, Google and Facebook reflects the importance of IP as a development factor in today's economy.

“You can see the explosion that is taking place in terms of what they call the non-fungible tokens (NFTs) where someone can produce a work of art on the Internet and assign their right and title,” the JBA president noted.

NFTs are digital assets that are assigned a digital signature, making them unique. The asset itself can be replicated, but the record of ownership of that asset is stored on a public ledger safely where everyone can see the certificate of ownership.

Blake noted that all the local commercial banks are involved in the pilot project.

BLAKE...royalties for music can besecuritised and a value can be put on it
BY ANDREW LAIDLEY Senior business reporter laidleya@jamaicaobserver.com

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