The Era of 10 Trillion KRW in Intellectual Property (IP) Finance Begins!

The Korean Intellectual Property Office (KIPO Commissioner Kim Wan-gi) announced on October 16 that the scale of intellectual property (IP) finance had surpassed 10 trillion KRW as of the end of August 2024. This signifies that over 10 trillion KRW has been supplied to innovative companies holding valuable IP.

IP Finance Balance Surpasses 10 Trillion KRW... 1.7-Fold Growth in Three Years

According to KIPO the outstanding balance of IP finance—where companies use their patents and other IP as collateral to secure loans guarantees or investments—has reached 10.21 trillion KRW*. This represents approximately a 1.7-fold increase over three years from 6.01 trillion KRW in 2021**.

The amount of IP finance supplied as of August 2024.
The breakdown: IP-backed loans of 2.25 trillion KRW IP investments of 3.50 trillion KRW and IP guarantees of 4.27 trillion KRW.
** IP Finance Balance Trend: (2021) 6.01 trillion KRW → (2022) 7.78 trillion KRW → (2023) 9.61 trillion KRW → (2024.8) 10.21 trillion KRW.
Notably 84.2% of companies utilizing IP-backed loans are non-creditworthy companies (with credit ratings of BB+ or lower)* highlighting the significance of IP finance in providing essential funds to low-credit firms with outstanding technological capabilities.

In 2023 84.16% of companies using IP-backed loans had credit ratings of BB+ or lower while 15.83% were creditworthy companies (BBB- or higher).
Continued Policy Efforts Including IP Disposal Support and IP Valuation Cost Assistance

KIPO has expanded IP-backed loans from national banks to local and commercial banks and introduced the IP Disposal Support Program to reduce the risk of IP-backed loans for banks. KIPO has also provided financial support to cover the cost of IP valuation**—a mandatory step for utilizing IP finance—and has injected government funds into IP funds through a patent account in the government’s mother fund playing a pivotal role in facilitating IP investments.

The program helps banks reduce the risk of IP-backed loans by assisting with the disposal of IP in case of default.
** IP valuation involves calculating the value or grade of a company’s IP and is a mandatory step for IP finance.
Additionally KIPO has worked closely with financial institutions through various initiatives including the IP Investment Institutions Council and the IP Disposal Support Organizations Council and has co-hosted the IP Finance Forum with the Financial Services Commission five times since 2019 to lay the foundation for policy discussions on expanding IP finance.

KIPO plans to further enhance its support to address the challenges faced by companies utilizing IP finance. To prevent defaults KIPO will strengthen monitoring of companies using IP-backed loans and implement a proactive prevention system by linking IP support projects with IP investment and guarantee services. The Sale and License Back (SLB) program* will be used to help struggling companies recover secure funds through business restructuring and pursue new ventures in cooperation with the Rehabilitation Court the Ministry of SMEs and Startups Korea Credit Guarantee Fund and Korea Asset Management Corporation (KAMCO).

SLB (Sale & License Back): A program that allows distressed companies to sell their IP to a support organization while retaining the right to use the IP enabling them to continue operations.
Commissioner Kim Wan-gi stated “IP finance which allows companies to secure funds by leveraging intellectual property the result of innovative ideas and R&D plays a crucial role in business growth.” He added “KIPO will continue to expand the scale of IP funds by creating joint funds with other government agencies like the Financial Services Commission and we will enhance the IP valuation system to ensure more innovative companies can secure funding through IP finance.”

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