How much would you pay for a tech patent?
The patents for this piece of tech are probably worth a lot more now but in reality predicting the future value of today's tech is a hit or miss process.
How much would you have paid 20 years ago for a piece of technology allowing you to connect with your friends and share stories, messages and pictures online?
The patents for this piece of tech are probably worth far more now. Nasdaq-listed Facebook, the firm behind this software, had a market capitalisation of about US$922.5 billion (S$1.2 trillion) as of yesterday.
It is said that hindsight is 20/20 vision. In reality, predicting the future value of today's tech is a hit or miss process.
Intellectual property (IP) lawyer Cyril Chua of Robinson LLC said: "It's a bit of crystal ball gazing to predict the future value of today's technology. You cannot predict which one will make it and which one will crash. As such, it is hard to put a value to one's patents."
Even so, Singapore wants to undertake the challenge. Specifically, it wants to develop expertise in putting tangible value on intangible assets (IA) - the collective term for all kinds of IP including patents, trademarks and copyrights. The mission is stated in the Singapore IP Strategy 2030 (SIPS 2030).
Unveiled on World IP Day last Monday, the 10-year blueprint aims to fuel Singapore's ambitions to be an IA and IP hub - particularly in the area of monetisation - not just in the region but also in the world.
The 2030 plan builds on previous ones in 2013 and 2017 that had focused on developing Singapore as a preferred destination for IP filings and dispute resolution.
WHY IS THE MOVE NECESSARY?
If the future is digital, the ability to tell which digital goods or assets are valuable, and which are not, will increasingly become a sought-after skill.
After all, a 2020 study from Brand Finance reported that the value of the world's IA stood at an all-time high of more than US$65 trillion last year.
According to its report, dubbed the Global Intangible Finance Tracker, over US$10 trillion of the total value resides in 10 firms. Seven of the 10 are tech companies: Apple, Amazon, Microsoft, Alphabet, Facebook, Alibaba and Tencent.
"Deep tech is largely driven by a group of IPs," said Mr Keoy Soo Earn, regional managing partner, financial advisory, at Deloitte South-east Asia. "If we have ability - and supporting professionals - to be part of this broader IP creation, management and monetisation ecosystem, we could become a one-stop shop," said Mr Keoy.
This ecosystem will attract businesses to base their economic activities here.
WHAT CHANGES MUST BE MADE?
An inter-agency task force to execute SIPS 2030, helmed by Minister in the Prime Minister's Office Indranee Rajah, will look into developing specialised IP courses. It will partner training providers like the Singapore Institute of Arbitrators and the Singapore Mediation Centre to allow professionals to pick up new skills. The task force did not reveal how many jobs will be created, but it is believed that these will go beyond helping firms to register and enforce their IPs. New skills will include IP valuation to help firms get bank financing or take part in sales, mergers and acquisitions.
Mr Keoy said that more firms are going to have a tech or IP element that will be core to their business. "IP should no longer be a language within the legal fraternity but a core business strategy to build a sustainable business in the new normal."
WHAT IS SINGAPORE'S ADVANTAGE?
Speed. In May last year, the Intellectual Property Office of Singapore (Ipos) launched a pilot to accelerate grants of patent applications in all technology fields, including artificial intelligence, to just six months. Dubbed the SG Patent Fast Track, it is the world's fastest application-to-grant process of its kind. The grant of patents in most countries typically takes two years or more.
Sixty patent applications have been accepted under this scheme to date. Ipos did not provide a breakdown of what technologies the patents are for.
WHAT ARE THE CHALLENGES?
Baker McKenzie Wong & Leow's economist Lip Hang Poh said: "Valuation is a combination of art and science." Even if the same quantitative, scientific methods are used, valuers will arrive at very different numbers due to subjective judgement, he added.
Fintech and IP lawyer Koh Chia Ling of OC Queen Street said that the objectives of the valuation may also become a source of contention. "Parties in a venture capital deal may prefer a valuation model which results in an optimistic but speculative valuation, whereas in a loan agreement, a more conservative valuation model may be preferred by the lender."
He added that some accounting standards do not see research and development expenses of an IA as part of its value, but as an operating cost.
Mr Andy Leck, principal and practice lead of the IP tech practice at Baker McKenzie Wong & Leow, said tech start-ups face two common challenges: "First, the gestation period before market demand is built up. Second, the availability of funds for start-ups to spend on IP valuation."
Experts told The Straits Times that fees could hit $80,000 for each valuation. It is also challenging for banks to lend against the future value of a piece of technology or IP.
"IP's value is volatile," a banker explained. At any time, another technology may unseat a tech firm's stronghold on the market and erode its value.
Experts also note that the value of an IP is intertwined with the business, and will involve the use of traditional evaluation metrics like annual revenue and customer base. "It is not about you having the patent, but about how the patent generates measurable value for your business by providing you with an unfair advantage over your competitors that translates into the securing of deals," said Mr Mervyn Lau, chief executive officer and legal counsel at local gaming start-up TokiGames.
Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.