Patent Security Interest in China

patent-without backgroundToday’s blog post has been kindly drafted to you by our IPR expert Dr. Toby Mak from Tee & Howe Intellectual Property Attorneys and Ms. Constance Rhebergen from  Bracewell LLP .  In their article, which was first published in UK Chartered Institute of Patent Attorneys (CIPA) Journal,  Dr. Mak  and Ms. Rhebergen give a detailed overview of China’s patent security interest market and explain how to register for patent security. Lending money to patentees with patent on mortgage is gaining popularity in China and this is something that European SMEs could also benefit from. 

In China, intellectual property assets, including patents, have certain similarities to other property rights such as real estate and tangible property, and the owner is able to dispose of such asset in any legally allowable manner. Typical transactions involving real estate include buying and selling, renting, and mortgaging. Although patents are extensively the subject of buying and selling (assignment), and renting (licensing), mortgaging (security interest or pledge) of patent rights is less common and often overlooked. Some top reasons contributing to this include the difficulty and expense in evaluation of security interest status of patents, instability of rights due to invalidation challenges, and the challenge of foreclosing upon a security interest to ensure realization (whether recovery of monies or transfer of secured asset), particularly compared to a required selling of real estate.

While intellectual property shares certain similarities with real estate and tangible property, the treatment of intellectual property differs in important aspects and is not intuitive.  Therefore, expertise regarding intellectual property security should be included in early stage development of strategy to ensure optimization of rights and value, both for financial institutions offering financing and companies involved in transactions.  Notably, while there is large group of patent attorneys knowledgeable about prosecution, managing security interests in patents is not necessarily part of their training.  Similarly, while corporate attorneys focus on security interests and financing, these specialist may be unversed in the unique aspects of intellectual property.  Identifying the right expert early in the process allows for structures and for drafting that will streamline efforts at a later date. Continue reading “Patent Security Interest in China” »