Intellectual Property, Insights

Intellectual Property as Collateral- A Review of the Stma Act

It is, indisputable that intellectual property (IP) rights represent important assets for companies within the innovative ecosystem and often comprises the foundation for market dominance and continued profitability. The value of these companies are mostly built on intangible assets, that can be used as collateral to obtain financing. For the last 25 years, the world economy has relentlessly migrated from asset-heavy industries to asset-light, and the value of most companies now resides primarily in their intellectual property.

This includes ‘hard’ intellectual property such as patents and copyrights, and powerful soft intellectual property like data, trade secrets and know-how. It is also incontrovertible that IP has emerged as a commercially valuable and dominant asset to the global economy. The integration of intellectual property rights system that recognizes the asset value of IPRs in the economy could accelerate business outcomes for young IP-rich startups, if lenders adopt a new mind-set to IP-backed debt finance.

Compared to other countries with higher rates on innovation, Nigeria seems be falling behind due to its slow approach in recognizing the asset value of intangibles in debt financing.
This article discusses the present state of the law with respect to the creation, perfection, and enforcement of security interests in intellectual property pursuant to the Secured Transaction in Movable Assets Act (STMA Act). It x-rays the context in which the creation of security interests in IP assets can be leveraged upon in Nigeria and sets out to establish how IP and intangibles might be able to facilitate the supply of finance to businesses that are rich in this asset class…

 

 

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