Structured Products
Special Servicer for IP Asset Backed Securitizations
In the past several years, the number of securitizations involving intellectual property (IP) as the underlying asset has increased significantly. This is a result of companies seeking to leverage their IP (i.e., patent, trademark/brand and copyright) royalty cash flows into collateral to achieve a cheaper source of funding. Thus, a new class of asset backed securities (ABS) has emerged which present special risk not associated with traditional securitizations (e.g., those ABS based on the repayment of mortgage or credit card balances).
In order to satisfy ABS investors (i.e., bond holders) and the ratings agencies, issuers of IP-backed securities must often appoint a “Special Servicer” (also known as a “Back-Up IP Manager”) capable of understanding, managing and liquidating the IP assets in the case of the issuer’s default or other distress event.
Ocean Tomo, as the leading integrated intellectual capital merchant banc, is in a unique position to understand, manage and mitigate the risks associated with such IP-based securitizations.
Our IP ABS Special Servicer capabilities derive from the expertise found within Ocean Tomo in the following business lines:
Sale/License-Back
Process
Phase 1 – Target Qualification
Analyze public data to assure client’s credit quality and financial condition is supportive of an S/LB transaction.
Phase 2 – Sale/License-Back Solution Assessment
Meet with key client personnel to discuss existing and pending opportunities that can be addressed by an S/LB solution.
Phase 3 – Patent Estate Review
Review in detail all client patents and related applications relevant to the identified solutions.
Phase 4 – Strategic Planning
Make initial assessment as to post-transaction IP commercialization strategies. Conduct research with potential patent contributors, etc.
Phase 5 – Transaction Execution
Bring legal/accounting advisors. Bring valuation experts to appraise IP. Perform due diligence. Structure transaction using a Patent Investment Entity or PIE®.
Phase 6 – Pool Commercialization
Facilitate necessary transaction with IP and enforcement entity, if applicable.
Intellectual Property Rights
SLB Partners,LLC is an authorized licensee of various intellectual property rights from JEM-TEQ®, LLC, a subsidiary of TEQ® Development LLC. The licensed intellectual properties include registered United States Trademarks “TEQ®” and “PIE®” (Trademark Nos. 2468235 and 2692426), and United States Patents No. 7,216,100; 7,228,288; 7,269,566; 7,315,836; and 7,353,202 and associated foreign and domestic counterparts.
Structured Products Professionals
Special Servicer for IP Asset Backed Securitizations
In the past several years, the number of securitizations involving intellectual property (IP) as the underlying asset has increased significantly. This is a result of companies seeking to leverage their IP (i.e., patent, trademark/brand and copyright) royalty cash flows into collateral to achieve a cheaper source of funding. Thus, a new class of asset backed securities (ABS) has emerged which present special risk not associated with traditional securitizations (e.g., those ABS based on the repayment of mortgage or credit card balances).
In order to satisfy ABS investors (i.e., bond holders) and the ratings agencies, issuers of IP-backed securities must often appoint a “Special Servicer” (also known as a “Back-Up IP Manager”) capable of understanding, managing and liquidating the IP assets in the case of the issuer’s default or other distress event.
Ocean Tomo, as the leading integrated intellectual capital merchant banc, is in a unique position to understand, manage and mitigate the risks associated with such IP-based securitizations.
Our IP ABS Special Servicer capabilities derive from the expertise found within Ocean Tomo in the following business lines:
Ocean Tomo's role as a Special Servicer encompasses:
- Limited interference with the issuer’s operations during term of financing
- Seamless transition in the event of default including training on the issuer’s IT systems and IP file maintenance
- Experience with IP collateral, valuation and markets
- Experience with bankruptcy process
- Experience in IP collateral sale/liquidation (including auctions)
- Independent oversight
Sale/License-Back
A Need for an Intellectual Property Sale/License-Back
If your company can answer “Yes” to any of the following questions, your company is likely a beneficiary of an IP S/LB solution:
- Do you seek to transform IP from a cost center to a profit contributor?
- Have your intangible assets grown significantly as an asset class?
- Do new accounting rules requiring impairment analysis affect your existing IP?
- Are you experiencing a shortage of traditional credit options?
Intellectual Property Sale/License-Back
- An Patent Investment Entity or PIE® purchases technology-based patents and/or related intellectual property held by a company
- The PIE® will simultaneously enter into a non-exclusive agreement on a field-of-use basis for a fixed term and fixed amount to license-back those rights needed by the original patent owner to continue to operate
- The original patent owner continues its operation using patented technology by paying a royalty to the PIE®
Benefits
- Provide financial liquidity at rates less than any alternative source of capital
- Provide financial liquidity with greater reporting accuracy and transparency
- Enhances returns in strategic or financial acquisitions or joint ventures
- Supports Intellectual Asset Management efforts such as patent donation/transfer pricing
Criteria for an Intellectual Property Sale/License-Back
SLB Partners’ financial professionals work with clients to assess specific IP S/LB solutions. The relevant IP will typically meet the following criteria:
- Being used/planned to be used by the original owner
- Significant remaining economic and patent life (7+ years)
- Substantial anticipated valuation ($25 million +)
- Commercialization potential by third parties (including out-licensing by licensing companies)
- Ability to aggregate related technology with a networking effect
Process
Phase 1 – Target Qualification
Analyze public data to assure client’s credit quality and financial condition is supportive of an S/LB transaction.
Phase 2 – Sale/License-Back Solution Assessment
Meet with key client personnel to discuss existing and pending opportunities that can be addressed by an S/LB solution.
Phase 3 – Patent Estate Review
Review in detail all client patents and related applications relevant to the identified solutions.
Phase 4 – Strategic Planning
Make initial assessment as to post-transaction IP commercialization strategies. Conduct research with potential patent contributors, etc.
Phase 5 – Transaction Execution
Bring legal/accounting advisors. Bring valuation experts to appraise IP. Perform due diligence. Structure transaction using a Patent Investment Entity or PIE®.
Phase 6 – Pool Commercialization
Facilitate necessary transaction with IP and enforcement entity, if applicable.
Intellectual Property Rights
SLB Partners,LLC is an authorized licensee of various intellectual property rights from JEM-TEQ®, LLC, a subsidiary of TEQ® Development LLC. The licensed intellectual properties include registered United States Trademarks “TEQ®” and “PIE®” (Trademark Nos. 2468235 and 2692426), and United States Patents No. 7,216,100; 7,228,288; 7,269,566; 7,315,836; and 7,353,202 and associated foreign and domestic counterparts.
Structured Products Professionals
| ABS Special Servicer | |
| Andrew T. Ramer | 312-327-4431 PH | 312-327-4401 FX |
| Managing Director | aramer@oceantomo.com | Download v-card | Biography |
| Sale/License Back | |
| Michael D. Friedman | 312-327-4428 | 312-327-4401 FX |
| Managing Director | mfriedman@oceantomo.com | Download v-card | Biography |