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    South Korea’s Intellectual Property Financing Surpassed 2 Trillion Won


    Source: Intellectual Property Protection in China

    In 2020, the total of South Korea’s intellectual property financing has surpassed 2 trillion won for the first time. Intellectual property financing is a way for companies to secure funding or raise money using their intangible assets—IP assets. Financing institutions evaluate the value of IP assets owned by a certain company, and provide loads based on its IP assets in the forms of pledge or collateral.Kim Yong-rae, Commissioner of Korean Intellectual Property Office (KIPO), said that in 2019, Korea’s IP financing has surpassed 1 trillion won, and reached about 2.6 trillion won in 2020, a rapid growth of 52.8%. Specifically, IP pledge has reached 1.9 trillion won, and IP mortgage has reached 708.9 billion won, and IP-based investment has reached 262.1 billion won in 2020. 

    A survey focused on the influence caused by special interest rates of IP-based collateral financing was conducted in 2020, in which 74.4% (1, 197 companies) of 1, 608 companies (who got loans using intellectual property rights) had a credit rating of BB-.  If the average credit rating of loans reached 3%-4%, the small and medium-sized enterprises mostly get lower interest rates of loans using IP assets. This will further reduce the burden of the companies.Moreover, according to the survey, the above-mentioned companies have obtained above 1 trillion won of IP-based financing, a 2.5-times increase over 2020. The private banks in Korea prefer to provide IP-based loans, the funds of which account for 68.5% (i.e., 748.3 billion won). Korean Industrial Bank, Woori Bank and Shinhan Bank have expanded their service for lending money to the companies owning lots of patents, and helped the small and medium-sized companies who had no choice but to give up the plans of patent commercialization just due to out of fund.

    For example, there was a company who tried to conduct clinical experiments of COVID-19 vaccine, but it found itself have the maximum amount of credit when was in urgent need of cash. In order to promote the production of vaccine, the company finally decided to pledge 7 patents relating to transgenic scissors, and finally got a mortgage of 2 billion won. Korea's IP-based financing has shown a remarkable increase, but the secured financing using intellectual property rights had a slight decline in 2020. According to statistics, Korea's IP-based secured financing has reached 708.9 billion won in 2020, a decline of 2.1% over 2019 (724 billion won). However, the money raised by “Online Patent Evaluation System” has soared to 250 billion won in 2020, a 44.5% year-over-year growth. This increase indicated patentees' strong demand of for getting sufficient funds by evaluating their IP assets. If the startups developing online advertising platforms fail to get money from financial institutions due to lack of sales data, they can apply loans from banks with IP assets evaluation papers issued by KIPO. Korea’s IP-based investments have reached 262.1 billion won in 2020, a 35.6% year-over-year growth. This circumstance owed to the IP-based Financial Investment Vitalization Policy implemented in July of 2020, and an increasing focus on IP-based investments from Korea’s private investment institutions. Park Ho-Hyeong, responsible for KIPO’s IP Policy Division, said that as Korea has entered into the phase of increasing IP financing, it is important how to sustain a stable growth in financial market. KIPO will spare no effort to provide financial support for innovation-based enterprises, including offering high-quality IP evaluation service.