Afundamental function of the government is to promote the prosperity of its people by implementing policies and programs that facilitate economic growth and development. The economic model of every state is uniquely designed to ensure that individuals have access to finance either through the state (the socialist model) or private individuals (the capitalist model). Nigeria operates a dual economic model whereby the state and individuals work together to ensure that finance and credit infrastructure are made available to persons in need of same. With a population of over 160 million people and a strong entrepreneurial spirit, access to credit facilities is one of the factors that will trigger economic growth in Nigeria. A robust credit access system will be a motivating factor for the small and medium enterprise sectors of the economy, enable growth, create wealth and eradicate poverty.
One of the key factors that affects access to credit is the availability of adequate securities or collateral in exchange for financing. Collaterals are assets that individuals or entities use to secure or obtain credits or loans from another party. Traditionally, fixed properties such as real estate are common collateral options. However, with innovations in technology, globalisation, and the continued protection of intellectual property rights through laws, policies, and regulations, the potential of using intellectual property as collateral is currently being explored.
This paper aims to examine the securitisation of intellectual property, which is the process of converting intellectual property assets into financial instruments that can be traded or used as collateral for financing. It will also analyse the benefits and risks of using intellectual property as a means of financing and provide recommendations on how to optimise the use of intellectual property for this purpose.
Definition of Key Terms
Securitisation is the process in which certain types of assets are pooled so that they can be repackaged into interest-bearing securities1 .
Intellectual property ("IP") is the creation of the mind. The World Intellectual Property Organization defines IP as creations of the mind, such as inventions, literary and artistic works, designs and symbols, names and images used in commerce2 . It is the category of property that includes intangible creations of the human intellect. IP rights are those legal rights associated with creativity and IP. Thus, though intangible, it permits people to own their innovations in the same way physical/tangible property can be owned. IP rights in Nigeria can be categorised into: Copyright, Trademark, Patent and Industrial Design.
Copyright is a branch of IP that grants the owner of a work economic and moral rights in his creations. The Copyright Act, 2022 fails to proffer a definition for the term 'copyright'. It merely stated in its interpretation section that copyright means "Copyright under this Act"3 , thereby proffering a descriptive approach to the term4 . Copyright is a property right in an authorship (such as literary, musical, artistic, photographic, or film work) fixed in any tangible medium of expression, giving the holder the exclusive right to reproduce, adapt, distribute, perform, and display the work5 .
It must be noted that copyright does not exist in perpetuity. Thus, under the Copyright Act 2022, the duration of Copyright varies depending on the category of the copyrighted work. Copyright in a literary, musical or artistic work is for a period of 70 years after the death of the author. For work made by government and government agency, it is for 50 years after the end of the year the work was made available to the public or if not made available to the public, 50 years after it was created. For audiovisual works and photographs, the duration of the copyright is for 50 years after the end of the year in which the work was first made available to the public with the consent of the author or 50 years after the work was created, if not made available to the public within that time. Copyright duration for sound recordings is for 50 years after the end of the year in which the recording was first made available to the public with the consent of the author or 50 years after the work was created, if not made available to the public within that time. For broadcasts, the copyright duration is for 50 years after the end of the year in which the broadcast first took place6 .
Trademark is defined as the symbol which identifies the source of a product. The law of Trademark (TM) grants the owner of a registered trademark exclusive rights to use the trademark and protect it from any form of infringement7 . According to Section 23 of the Trademark Act 2004, a Trademark shall subsist for a period of 7 years from the date of first registration and can be renewed from time to time in accordance with the provisions of the law.
Patent is the right granted to an innovator as a reward by providing him a legal monopoly to incentivise innovation. This right granted to the innovator prevents others from copying his idea.8 An invention is patentable if it is; new, result from an inventive activity, capable of industrial application (or if it constitutes an improvement upon a patented invention and also is new, results from inventive activity and is capable of industrial application), and it does not fall within an excluded subject matter.9 The duration of a patent is for 20 years subject to the payment of the stipulated annual renewal fees. Where the patent holder defaults in the payment of the annual renewal fee, the patent lapses, after which a 6-month period of grace for payment will be granted. If it is still not renewed upon the expiration of the 6-month period of grace, the patent cannot be revived again10 .
Industrial Design is the way of creatively determining the features of a product before the manufacture or production of the product. The PDA in Section 12 describes Industrial Design as any combination of lines or colours or both, and any three-dimensional form, whether or not associated with colours, if it is intended by the creator to be used as a model or pattern to be multiplied by industrial process and is not intended solely to obtain a technical result.
Securitisation of Intellectual Property
Traditionally, IP was not recognised as a viable means of securitisation, but with the advent of technology and the growth of information products such as computer software, pharmaceuticals, films, musical works etc., people are exploring new means of securitisation to finance their businesses. One of the new means of securitisation, being IP is the crux of this work. The securitisation of IP enables the capitalisation of IP rights that generates foreseeable streams of royalties to obtain interim financing for business operations. This practice is however alien to the Nigerian jurisdiction because there is no legal framework that permits or encourages the usage of intellectual property as a means of generating funds.
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Footnotes
1. Andreas Jobst, 'Back to basics, What Is Securitization – Finance & Development (September, 2008) www.https://www.imf.org/external/pubs/ft/fandd/2008/09/pdf/basics.pdf accessed 15 June 2023
2. WIPO, What is Intellectual Property https://www.wipo.int/aboutip/en/#:~:text=Intellectual%20property%20(IP)%20refers%20to,and%20images%20used%20in%20commerce accessed 15 June 2023
3. Copyright Act 2022, s 108.
4. Copyright Act 2022, ss 2, 9, 10, 11, 12 & 13.
5. Black's Law Dictionary (7th edtion, 1999).
6. Copyright Act 2022, s. 19.
7. Trademark Act , s 5.
8. PDA 1971, s 1(1)(a).
9. Patents and Designs Act, LFN 2004, S. 1
10. PDA 1971, s 7
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