Thursday, November 24, 2011

MDeC To Unveil IP Valuation Model In 2012

The Multimedia Development Corporation (MDeC) is striving for Intellectual Property (IP) rights to be accepted as assets or collateral through the IP valuation model which is set to be introduced in the first quarter of next year.

MDeC chief operating officer Ng Wan Peng said currently there is no collectively acceptable IP valuation framework which financial institutions can adhere to when processing applications for financial assistance.

She said financial institutions are reluctant to accept IP as assets or collateral because of the difficulty in determining the value of Intellectual Property.

Ng said the introduction of the IP valuation model is the first step taken in assisting financial institutions to refer to a specific methodology in valuing IP rights.

MDeC, the driver of MSC Malaysia's National ICT Initiative, is working very closely with Intellectual Property Corporation of Malaysia (MyIPO) in getting the necessary approvals for the IP valuation model.

At the 22nd MSC Malaysia Implementation Council Meeting (ICM), organised by MDeC last year and chaired by the Prime Minister, it was decided that MyIPO should formulate an IP valuation model in accordance with the National IP Policy, she said.

Since then MDeC and MyIPO, together with other stakeholders, have been collaborating in preparing an introductory IP valuation framework that looks into the different types of IP rights. MDeC and MyIPO are confident that the framework would be ready and be tested with a few IP owners soon.

"More needs to be done as it is a new area and not many have experience in this. We must start getting the financial institutions to value IP rights as something of high value. Educating and increasing the level of awareness is necessary in order to ensure more people understand and appreciate IP," Ng told Bernama in an interview.

Ng revealed that hundreds of MSC Malaysia-status small-and-medium enterprises (SMEs) that possess IP rights such as patents, copyrights and trademarks are facing difficulties in getting financial assistance to commercialise their products.

"More than 1,000 SMEs with MSC Malaysia status have IP rights which range from patents to trademarks, copyrights and industrial designs. Not all need financial assistance to commercialise their products but most of them will be happy to have some kind of recognition that the IP created by them actually has value," she said.

According to Ng, the IP valuation model could serve as a guide for the financial institutions as well as stakeholders in conducting valuation or use it as a basis to get third party valuators to undertake the valuation process.

Ng said IP owners, financial institutions and Bank Negara have provided input for the valuation initiative for the IP. MyIPO together with MDeC had conducted feedback sessions with some financial institutions, industry players as well as IP owners to make them understand this area better as well as share their concerns in the valuation of IP rights.

"We are happy with the cooperation provided by the parties involved in this IP valuation initiative. MyIPO has been working hard in driving this initiative including looking at the amendments of the IP laws to allow the adoption of IP rights as security," she said.

Although the government has been promoting an innovation and knowledge-based economy, support from financial institutions is not forthcoming as they find it very difficult to accept IP rights as a collateralisable asset.

"I think they are more comfortable in giving out the loan based on business plans on tangible assets or proven business rather than looking at IP as collateral. It's not that they don't want to value the IP, the problem is that they don't know how to value IP rights," she said.

"We do not see financial institutions keen in readily accepting IP as collateral at this moment. We were told by some companies, most of them SMEs, that they have difficulties in getting banks to recognise their IP rights," she added.

Ng said the ultimate goal of the IP valuation initiative is for IP rights to be recognised by financial institutions as an asset that can be put up as collateral.

"These are also opportunities for the banks. Financial institutions have to start developing capability in these areas as more and more companies will have less and less tangible assets. In becoming more competitive, financial institutions would need to know how to value intangible assets and put a defensible value that can mitigate the perceived risk attached to assets such as IP.

"Eventually, we hope that local companies will continue to create IP which will be accepted as an asset that can be transacted and thus help increase our competitiveness as a nation," she said. -Bernama

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