In 2008, China's State Council issued Outline of the National Intellectual Property Strategy, which explicitly stated that "Independent innovation is encouraged to acquire IPRs and be commercialized and industrialized, and enterprises are guided to realize the market value of their IPRs through rights transferring, licensing, pledging or other means. [1]" Since the implementation of the 14th Five-Year Plan, China has witnessed rapid growth in IP financing: in 2023, China's patent and trademark pledge financing reached CNY 853.99 billion, a year-on-year increase of 75.4% [2], benefiting 37,000 enterprises; in 2024, banking institutions in China issued a cumulative total of CNY 255.57 billion in IP-backed loans, marking a 33.4% year-on-year growth [3].
However, at the practical level, IP financing still faces prominent challenges in the valuation and disposal of IP assets, as well as information asymmetry. These issues are common across the industry, relevant practices are only advancing in continuous exploration. Against this backdrop, Intellectual Property Observers was honored to invite Mr. Martin Brassell, Co-founder and CEO of Inngot, to engage in an in-depth discussion on IP financing and intangible asset valuation during the 14th Business of IP Asia Forum. In the process, Mr. Brassell not only provided practical advice for enterprises on IP financing, but also analyzed the similarities and differences in policy design across different countries from an international and comparative perspective, offering professional insights into global IP financing trends.
As a recognized authority in the field, Mr. Martin Brassell has dedicated over 15 years to IP financing, specializing in asset identification and valuation, and is committed to enhancing enterprise value. He has been deeply involved in policy research and development, and has authored a number of influential research reports for the UK Intellectual Property Office (UK IPO), the Intellectual Property Office of Singapore (IPOS), the World Intellectual Property Organization (WIPO), and the Organisation for Economic Co-operation and Development (OECD), playing a key role in advancing the financialization of IP globally.
The following is the content of the dialog:
Intellectual Property Observers:
Could you introduce yourself and share why you decided to build Inngot?
Mr. Martin Brassell: Sure. My name is Martin Brassell, and I am the Chief Executive and Co-founder of Inngot, based in the United Kingdom (UK). We established the company in 2007 with the goal of helping businesses understand and leverage their intellectual property (IP) and intangible assets. Our approach focuses on enabling companies to identify, value, and commercially utilize their assets through an online platform. By collaborating with industry professionals and adhering to valuation standards, we provide robust and cost-effective IP valuations.
Intellectual Property Observers:
In the process of IP financing, how can we accurately assess the value of IP and manage related risks?
Mr. Martin Brassell: IP's value depends on its intended use. Also, different valuation methods are needed for different purposes.
From a lender's perspective, the primary concern is whether the IP contributes significantly to the business's overall value. In other words, is the IP in use and generating cash flow? Since cash flow is essential for loan repayment, there has to be connection between the IP and the financial viability of the business. If such a connection exists, it may justify using the IP as collateral. In China, this typically involves a pledge registered with a specialized agency, whereas in Hong Kong, it would likely take the form of a fixed charge, similar to the practice in the UK.
Establishing the value of the IP and securing an interest in it provides a strong incentive for responsible asset management. This means that businesses are highly motivated to maintain their IP assets and ensure loan repayment, as the lender holds security over assets of greatest value to the company.
Today, IP and intangibles have largely replaced physical assets as the primary driver of business value. The specific valuation approach taken depends on the type of loan or financing facility being considered. For instance, we collaborate with NatWest, the largest commercial lender in the UK, which seeks to use IP as collateral. Their objective is to lend against IP that retains value even in scenarios where the business does not perform as expected. To address this need, we have developed a specialized valuation method known as orderly disposal value. This approach determines the potential price at which the assets could be re-marketed in a situation where the business continues operating but is under-performing—rather than in a liquidation scenario.
This valuation method ensures a fair and reasonable forward-looking price assessment tailored to the context of lending. At the time of the loan, the assets are not for sale; they are owned by the company, which intends to retain and develop them further.
Consequently, their sale would only occur if the business's performance deviates from expectations.
Conversely, from an investor's standpoint, the focus shifts towards evaluating the potential of the IP to drive business growth, assuming it receives adequate funding and is successfully developed. This requires a different set of valuation calculations tailored to investment considerations.
Intellectual Property Observers:
What professional tools or methods does Inngot have in this regard?
Mr. Martin Brassell: We primarily use two well-known valuation methods: income and cost.
Our goal wasn't to create new standards but to develop a system that applies existing principles and standards more efficiently.
For income valuation, our main approach is the "relief from royalty" method, also known as technology licensing. This involves determining what someone an independent party would pay to license these assets from your business. To establish accurate licensing rates, we use large international databases of licensing agreements, ensuring precise pricing. Otherwise. If steps are not taken to consider IP value in isolation , there's a risk of overvaluing IP it by attributing value to other business activities.
We favor the relief from royalty method because it's straightforward for customers and lenders to understand. It's widely used in China and is the approved standard in countries like Malaysia and South Korea. There's growing international consensus that it's a reliable method for financing purposes.
For the cost approach, we focus on two key aspects.
One is unseen investment value. Intangible assets are often poorly represented in company accounts due to regulatory limitations. This can be problematic for companies that have invested heavily in intangibles but can only show a fraction on their balance sheets. Our method, based on a reproduction cost principle, aims to quantify this hidden investment in a way that aligns with accounting practices.
The other is asset lifespan and obsolescence – we assess where the company is in the IP asset's lifecycle, how much has been invested to date, and what future investments are needed to keep the assets relevant. We also consider factors like aging, obsolescence, and whether the asset is nearing the end of its legal or economic life. By analyzing R&D expenditures, technology development costs, and protection expenses, we provide a comprehensive cost picture that isn't visible in the company's accounts.
Intellectual Property Observers:
Did AI (intelligence artificial) play a role during the evaluation process?
Mr. Martin Brassell: Yes, AI informed the development of our unique systems, as we used it to analyse patent characteristics. However, we recognize that lenders need a robust audit trail for their credit decisions, and a 'black box' approach does not provide this – it is always important to show and explain how a valuation conclusion has been reached.
Customers interact directly with the company through our systems. Understanding a business's intangible assets requires effective communication with the organization itself, as no one else can provide complete information, and intangible assets cannot be independently discovered. However, companies often lack the language to fully describe the breadth of their intangible assets. We provide a tool that gives them this language. We then conduct automated verification, supplemented by manual checks when necessary, to ensure a comprehensive picture of all known IP rights.
For the valuation process, customers input all relevant information into the system. My team's primary role is to moderate these inputs. While the system calculates value in a way we find reliable, the accuracy of any valuation depends on the quality of the inputs. If the inputs are inconsistent or show significant optimism bias – common in early-stage companies – we adjust for these factors and correct any identifiable inaccuracies. If something doesn't make sense, we go back to the company for clarification or additional information.
Once we are satisfied with the inputs, we generate a report that can be shared with lenders, investors, accountants, or any other relevant parties.
Intellectual Property Observers:
How do you view IP asset valuation in China? Can we say that it's now a 'blue ocean' market?
Mr. Martin Brassell: It depends on how you define a 'blue ocean' market. China has had patents for less than 40 years. Several companies, both state-owned and private, are involved in monetizing IP or turning it into stock for listing. I've also read about securitization activities starting in China.
It's a great but complicated question. Sadly, I haven't had the opportunity to return to mainland China since COVID, but I visited three times before, meeting with banks, the China Appraisal Society, and IP officers. The picture is mixed.
China has advanced faster in IP financing than any other economy. Other countries find this impressive, but given China's economic size, there is surely still significant potential for IP financing to grow.
The view from the US, the UK, and Europe is somewhat similar: activity has started and shows promise. What sets China apart is its policy focus. Western governments tend to let markets function independently, while Eastern markets recognize the need for government intervention to prime these markets.
However, all subsidies eventually come to an end, and the market must be able to stand on its own commercially. China has done an amazing job at all levels
– passing enabling legislation, setting appraisal standards, and providing subsidies for valuation costs and interest rates.
In the UK and US, the main challenge is risk management. Lenders struggle with unfamiliar asset classes, especially when unsure of their value or reliability. But we have been helped by government research in the UK showing that loans backed by IP are 40% less likely to default, with losses 50% lower. This trend has made lenders take notice, while recognizing that not all IP is commercially valuable.
Another factor is the behavioral influence of IP. Companies value their IP highly and will cooperate in refinancing or restructuring to avoid losing these assets, as losing them often means losing the business itself. This makes IP an excellent form of security.
China remains a manufacturing powerhouse, so IP's role differs. Initially, IP financing involved blending IP with other assets, but recent reports show financing based solely on patents, trademarks, and copyrights is gaining momentum.
This shift is driven by the fact that lenders can no longer afford to ignore intangibles. The challenge remains managing risk effectively.
Intellectual Property Observers:
What measures do mainstream countries take in risk management?
Mr. Martin Brassell: In China, risk is mitigated by reducing the cost of loans to banks. Special measures allow banks to absorb more losses before facing capital provision issues when intangibles are involved—a sensible policy. Additionally, many loans are backed by guarantees from local, regional, or national initiatives, supported by an established guarantee market. In China, IP insurance is evolving to cover not only litigation financing but also IP-related losses, reflecting important trends.
In the US, IP insurance has become more sophisticated. Several high-profile deals have been successful, with substantial value underwritten by insurance. What's most reassuring for lenders is that insurance has paid out when needed, though trust remains a key issue.
In the UK, risk management focuses on two factors: the orderly disposal value of assets and the loan-to-value (LTV) ratio. We recommend an LTV ratio based on our assessment of the asset's strength, resale potential, and separability from the business. For example, UK banks like NatWest typically lend up to 50% of an IP asset's orderly disposal value, ensuring loans align with a company's repayment ability. This approach is standard in Western commercial banking, where loans are always tied to a company's capacity to repay, regardless of asset type.
Overall, risk management in banking relies on insurance, cautious valuation, and prudent lending practices, consistent with standard credit policies.
Intellectual Property Observers:
What are China's advantages in IP financing and monetization compared with other countries?
Mr. Martin Brassell: The main difference lies in the broad spectrum of approaches observed internationally. Certain markets, like China and South Korea, place a strong policy emphasis on IP financing. In South Korea, a comprehensive set of measures has been introduced, some of which are not yet implemented in China, making the comparison between the two countries both interesting and, in some aspects, similar.
A common feature in China, shared with many other schemes globally, is the recognition of the need to address the cost of IP transactions. This takes two forms: subsidizing the valuation due diligence process or reducing the cost of money, making loans less expensive for banks or borrowers. These measures are also seen in other countries.
One key difference is how IP assets are disposed of if needed, which is an important consideration for lenders. In South Korea, a specialist disposal agency has been established to buy patents from banks and sell them at a pre-agreed price, addressing risk concerns for banks. In Japan, the focus has been on subsidizing valuation reports, particularly for regional banks, helping them better understand the relationship between IP and business performance. However, this approach is limited in scale.
Another area of commonality is IP insurance. In China, there has been significant focus on IP insurance recently, covering defense against infringement, pursuing infringers, and managing risks in financing arrangements. Globally, IP insurance is still considered immature, with companies underutilizing it despite the real risks. The US leads in this area due to its strong culture of IP litigation, but other regions, like Europe, are expected to see growth in IP insurance adoption.
Finally, collateral protection insurance safeguards lenders by covering costs if something goes wrong. However, there is a tension between insurers, who may want to sell assets quickly to maximize value, and banks, which may prefer to work with the business to restructure or reschedule loans.
An emerging model in other markets involves insurance acting as a backstop for banks, allowing them to continue recovery efforts while receiving interim payouts. If recoveries exceed expectations, insurers may recoup some funds. This model is more favorable for commercial banks, which prioritize customer relationships and public perception.
Intellectual Property Observers:
In your view, what policy support could China strengthen to better promote IP financing and monetization for Chinese enterprises?
Mr. Martin Brassell: It would be presumptuous for me to offer recommendations.
However, based on my observations of global trends, China has been more proactive than most countries in fostering this market, with the possible exception of South Korea. In Korea, the situation is more complex due to their established technology financing model, which focuses on credit ratings and company-specific technological assessments, with IP financing operating somewhat separately.
Over time, I believe most policymakers would agree that the ideal outcome is for the market to function independently, with interventions such as subsidies and guarantees gradually phased out as banks accumulate sufficient data to assess risks and opportunities autonomously.
I commend the Chinese government for implementing targeted incentives and subsidies at regional and local levels to encourage experimentation in IP financing. Practical engagement is essential for progress – lenders and investors must reach a level of comfort to actively participate. Significant progress has already been made. The next challenge lies in enhancing sustainability. One way to achieve this, in collaboration with valuation authorities, is to reduce upfront costs and improve consistency by automating certain aspects of the process.
This brings me back to your earlier question on AI. That's a really complex area. While AI excels in environments with extensive, reliable datasets, IP valuation presents unique challenges.
The core difficulty lies not in calculations – which can be performed using conventional tools – but in sourcing accurate inputs to produce reliable results.
AI holds promise in aiding valuers by analyzing market trends, contextualizing innovations, and summarizing large volumes of data. However, developing an AI-driven valuation model requires further advancements in explainability.
Currently, AI lacks transparency in decision-making, making it unsuitable for lending decisions where clear justification is necessary. While we may explore AI applications in the future, its current limitations necessitate caution.
Intellectual Property Observers:
What advice can you share with enterprises that are looking to leverage IP for financing and monetization?
Mr. Martin Brassell: Our research has focused extensively on the preparatory steps enterprises should undertake for IP-based financing. We are pleased to have been able to author the WIPO guide on this subject.
The preparatory work primarily involves two critical aspects: First, companies must be able to comprehensively articulate their IP portfolio – specifically, demonstrating ownership or control (preferably ownership) of these assets. Second, they must establish the relevance and significance of these assets to their core business operations. Without clear relevance to current business activities, it becomes challenging to convince lenders or investors of their value.
The fundamental questions to address are: What form do these assets take, and what role do they play in the business? This forms the essential preparatory work. Once these elements are clearly defined, companies can present a formal business plan to potential lenders or investors, outlining: the specific assets held, their strategic importance, their value contribution to the business, and why they should be considered in lending decisions.
The subsequent step inevitably involves valuation. The WIPO guide recommends initiating discussions with lenders first, as they may have specific preferences regarding valuation providers. However, companies should concurrently prepare by: developing a comprehensive business plan, creating realistic financial projections, and documenting their IP-related investments. Financial institutions are more likely to recognize the value of IP assets when they represent substantial business investments, as this reduces concerns about easy replication by competitors.
These represent the key considerations in this process.
Intellectual Property Observers:
What specific cooperation opportunities and areas are worth paying attention to?
Mr. Martin Brassell: For us, it's about how IP financing continues to develop, identifying target companies, understanding the insurance markets, and reducing the overall cost of valuation activities—areas where we can contribute the most.
We are happy to work across all industry sectors. However, IP financing takes a different form in pharmaceuticals and biotechnology due to their long development periods and high risk. These sectors typically require equity investment rather than traditional financing.
In contrast, most other sectors have businesses generating cash with IP that could grow faster by leveraging their existing investments. Currently, the most promising sectors include:
Software businesses, especially those protected by copyright, which generate cash flows through enterprise software;
Sustainable environmental technologies, where there is significant IP activity;
Creative industries, such as films, publications and gaming, where we've recently completed deals;
Medical devices (excluding biotech), which is a strong area. For example, Open Bionics, a company producing advanced prosthetic limbs for children, has successfully licensed-in brand properties from companies like Disney, creating both social impact and commercial value.
IP is cross-sector and everywhere. The key policy focus, as many in banking would agree, is helping companies understand that IP is an accessible and relevant financing route. They need to recognize that IP is not just a legal construct - it's a valuable asset that can drive growth and be leveraged in multiple ways.
References:
[1]国家知识产权局《提升知识产权质押融资，助益营商环境优化》https://www.cnipa.gov.cn/art/2024/3/19/art_3357_191075.html
[2] 2023年全国专利商标质押融资同比增长75.4%——知识产权专利转化运用加速推进https://www.gov.cn/lianbo/bumen/202401/content_6924386.htm
[3] 证券日报《七部门发文进一步优化知识产权领域营商环境》http://epaper.zqrb.cn/html/2025-03/22/content_1129468.htm
