As part of their conference package, delegates at tomorrow’s IPBC China event here in Beijing will be receiving the third issue of our Chinese-language magazine, which just hit my desk last week. Alongside translations of some of our most popular recent IAM features – such as the annual Market Makers list and a detailed analysis of the state of play in the US brokered patent market – there’s a significant amount of totally original content. One of these is an interview IAM did with Intellectual Property Office of Singapore (IPOS) chief executive Daren Tang.
It was a wide-ranging conversation, and what follows is just an excerpt. Tang, who gave the keynote address at IPBC Southeast Asia, talks about IP in a much more commercially focused way than most other IP office heads. On IPOS’ much talked-about IP Financing Scheme, Tang acknowledges that the growth of such lending faces significant obstacles and proposes a few adjustments to the scheme going forward.
Also of note was Tang’s commitment: “We will support the establishment and growth of intermediaries and players that are needed in any mature innovation ecosystem – IP valuers, technology assessors, patent aggregators, IP strategists and consultants, IP-focused funds, to name a few.” In February, this blog wrote that Singapore may move to attract NPEs and other entities focused on commercialising and monetising IP – patent aggregators would seem to fit the bill.
Finally, Tang discusses China, and the importance of having a presence on the ground there if you want to take part in the growth of its innovation ecosystem. That’s something that serious players among both operating companies and NPEs realise. Many of them will all be in one room in Beijing tomorrow, here at the Grand Hyatt.
What was your focus during your first year as chief executive and what are your priorities going forward?
The key focus has been to re-imagine the role of the IP office in a world where our people and companies are innovating and creating value in very new ways. More than ever, companies are built around ideas, databases and know-how – many of the biggest listed companies have most of their value in their intangible assets. Innovation is also now becoming globalised, not just within companies, but also in the increasing number of companies moving towards open innovation models. This is only natural – it is getting increasingly tougher for any one company to address the biggest challenges that we face.
In such a world, it is no longer enough for IP offices to see themselves as a collection of Registries or as an IP regulator. These are still important functions, but even doing them well may not be sufficient anymore. Instead, we have to evolve into innovation agencies, using our expertise, regulatory powers and networks to shape an environment that encourages people and companies to create economic and social value, and reward them for doing so.
We also need to change the way we talk about IP. IP is not about law, it is about value. I recently paid a visit to Toyota’s IP team and was deeply impressed by their vision of using IP to change the world. Too few IP professionals envision what they are doing in such broad, visionary terms. IP offices, in particular, are often guilty of talking about IP in overly technical ways that stakeholders and the public do not understand, perpetuating the myth that IP is an arcane branch of knowledge best left to the IP technicians. And this ultimately undermines the good work that many IP offices and experts do, because many people then do not see it as relevant to their lives. So, part of the change is in changing the way we talk about IP, so that people change the way they think about IP.
IPOS announced it will extend the IP Financing Scheme for another two years. How would you assess the scheme’s success so far, and what are your expectations for the scheme in the next two years?
The IP Financing Scheme has generated a lot of interest since it was launched and especially after we announced the first few successful applications in the middle of this year. I see the Scheme as playing an important role in getting our financiers to see IP as an asset class, but it will need to evolve into something that has broader appeal and a bigger impact on the entire ecosystem. There are a couple of factors that we are looking at as we adjust the Scheme.
First, a company’s value does not just revolve around one or two types of IP, but around a portfolio of all its intangible assets, including IP but also extending to databases and know-how. We have acknowledged this by expanding the Scheme to include trade marks and copyrights. However, this probably needs to be further broadened.
Second, the Scheme is ultimately about giving innovative companies greater access to financing. Given the importance of private equity and other financiers in the ecosystem, we will need to find ways to bring these other stakeholders on board the programme. Moreover, banks operate within a heavily regulated environment, and will always be more constrained in embracing new forms of collaterisation and financing as compared to others. So it makes sense to see how we can work with others who operate within fewer constraints, so that there will be a menu of options and players for innovative companies.
Third, the valuation and evaluation of “asset-lite, tech-heavy” companies will be a key complement to the success of any financing scheme. Valuation focuses on current value, but evaluation focuses on future value, and how to grow it. Both skillsets are still relatively lacking in the world, but we see emerging pockets of excellence where service providers are able to do both. In a mature ecosystem, having expert valuers and evaluators will give investors, financiers and the companies themselves a sense of where they stand, and what they can do in order to further grow the company.
These are all very new areas, and in a way, we are entering into uncharted waters. I am certain the Scheme will evolve and mature in the next two years, but it will have to be done in a spirit of experimentation, openness and collaboration.
What do you think is the biggest obstacle to the growth of the IP lending industry, and what is the best way to address that obstacle?
The awareness of borrowers, mindsets of lenders, and the relative newness of IP valuation can all indeed be pinpointed as factors hindering the growth of IP lending. However, if you think about it, the traditional model of a loan backed by a collateral may not be the best financing vehicle for today’s idea and innovation driven companies.
I think we should be prepared to look outside of IP lending to find new ways of financing growth. We are beginning to see more financing facilities structured around venture debt, providing businesses with easier access to capital where loans can be repaid with equity instead of interest. These somewhat more novel ways may show the way forward in finding a more appropriate vehicle for financing companies whose value are largely centred around intangible assets.
Several recent moves by IPOS seem geared toward China. What can both sides gain from this relationship?
China’s market size is not only compelling, but it is also in the midst of a major re-structuring to grow through domestic demand and innovation. Chinese companies like Huawei and ZTE are already the top users of the international patent system, and China’s IP filings in all categories have gone through the roof in recent years. Beijing, Shanghai and Guangzhou have set up IP courts to ensure that the infrastructure for IP enforcement is strengthened. It is a market that one cannot ignore, not just in terms of size and ambition, but also in its growing sophistication.
In May this year, IPOS opened Singapore’s first ever overseas IP office in the Sino-Singapore Guangzhou Knowledge City (SSGKC). The SSGKC is a flagship project to catalyse Guangdong’s economic transformation into a knowledge and innovation hub. Our presence in China is intended to do three things.
First, we want to participate in the growth of an economically dynamic region with a focus on growth through innovation. Of course, we can do this in other parts of the world, but the scale and speed at which this occurs in China is attractive to us.
Second, we hope to introduce Singapore service providers to Chinese companies. Singapore is already well-known as a hub for professional services, but it is always useful for the Singapore government to get involved in paving the way. In May, for example, I led a trade delegation of patent attorneys to showcase our services to Chinese companies.
Third, we want to attract innovation driven Chinese companies who are seeking growth opportunities in ASEAN and Asia to establish their base in Singapore. We may not be the cheapest jurisdiction in ASEAN, but we have an excellent infrastructure and connectivity to the region. In addition, our knowledge and networks with our fellow ASEAN countries can be useful to Chinese companies who have to navigate what they often feel is a staggering array of cultures, communities and markets in the ASEAN and larger Asian region.
While we can do all these from Singapore, relationships and trust can only be built up when there are opportunities to meet face to face. In the long run, our China office will benefit from the increasing flow of trade and investments – and ideas – between China and the ASEAN region. In an uncertain world, facilitating the cross-border flows of ideas, enterprises and expertise is even more of a good thing.