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Intellectual Property as Collateral
The scope of using intellectual property as collateral is discussed. Through examples, it is shown here that, owing to its volatile and dynamic nature, IP is not a reliable collateral. There is a pressing need for proper methods of valuation and registration so that confidence in IP as collateral is enhanced.
The question of whether intellectual property (hereafter IP) could be used as collateral for a bank loan is a recent and a controversial one. Cash-strapped entrepreneurs may have the idea, yet at the same time, could lack the money to condense it into reality. To bridge this gap, it would be worth considering whether and under what circumstances—their very idea itself should be deemed sufficient for successfully securing a loan.
While such a situation would be ideal for entrepreneurs, when this question is considered from the perspective of a bank; a natural apprehension that comes to mind, pertaining to the use of IP as collateral for a loan, has to do with the fundamental nature of IP itself—in that it is intangible, might not retain its value unlike gold or real estate, and would therefore pose a high amount of risk to any bank accepting it as a valid collateral for a loan.
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