The future for Asia’s sovereign patent funds is in the private sector, say their chief executives 06 Sep 16
Asia has led the way in the development of public-private patent aggregators, which have become more popularly known as sovereign patent funds (SPFs). But according to the men heading up the region’s two largest SPFs – Intellectual Discovery (ID) and IP Bridge (IPB) – both are more likely than not to be fully private-sector entities within the next few years.
I recently caught up with Kwang Jun Kim, who was appointed as ID’s CEO in early 2015 after several years’ service as chief IP officer at Samsung Display. Noting the firm's positive performance over the past 12 months, Kim revealed that it is beginning to explore strategic options as it contemplates a future without financial backing from government. “We’re confident we will handle that – numbers are up compared to last year, with a higher bottom line, thanks to straight licensing revenues and patent transactions,” he told me. “Going private means we would have a little more freedom – we’d be able to broaden our horizons, perhaps working with non-Korean operating companies and partnering with other NPEs, if those scenarios are consistent with our strategy and goals.”
Across the Korea Strait in Japan, partially state-backed IPB also looks to be moving towards full privatisation. Shigeharu Yoshii – who has been CEO at IPB since it was established in July 2013 – told me recently that an eventual evaporation of public funding would be in line with expectations. “The IP business which we are running is necessary for the healthy growth of industries and academic research institutes, but it takes years to make a profit until that business can continue to run independently,” he said. “Therefore, so-called ‘patient capital’, such as government-supported funding, is necessary. But we think that this kind of business should ultimately be managed by the private sector. Therefore, government support should be limited to the initial stages.”
Kim similarly suggested that ultimately, ‘going private’ had always been a highly likely outcome for ID. “You have to go back and ask yourself why there was a decision to set up a sovereign fund in the first place,” he said. In the United States, a sophisticated secondary market in patents assets, with an extensive ecosystem of NPEs, brokers and other intermediaries, had developed organically within the private sector, without the need for substantial state impetus. But all the indications were that a similar scenario would not emerge in the Asia-Pacific region, said Kim: “In Korea, Japan and France [French SPF France Brevets], we got a little help, in the form of public money.”
On a related note, Beijing-based patent buying fund Ruichuan – the closest thing that China looked to have to an SPF – has recently gone private, after Zhigu, the firm that managed it, was absorbed into the IP department at consumer tech company Xiaomi.
Typically set up with a combination of government, institutional investor and individual investor capital, each of these entities were set the general goal of promoting national economic interests by levelling the IP playing field for domestic businesses through the acquisition, licensing and sale of strategically important patents. In other words, they were established with state blessing in order to kickstart a fluid market in patent assets; and, now that they have reached a point where they are completing significant deals and are asserting their rights, the time is approaching where the state is able to bow out, leaving the SPFs to stand on their own.
The fact that these kinds of patent monetisation activities often go hand in hand with controversy is another dynamic at play here. The example of Ruichuan illustrates this well; had news emerged that a Chinese government-backed investment fund was intending to assert patents against US companies, it would have created hysteria in the US press. As privatised concerns, these types of entities are perhaps better positioned to deflect such hullabaloo. There is more than a good chance that the Japanese and South Korean governments have always been looking for the earliest possible opportunity to make their exit.
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