Will patent auctions open up bank IP lending?

Over at the IAM Magazine Blog, Joff Wild has an interesting posting on a new patent auction based on Article 9 of the Uniform Commercial Code (UCC). Article 9 of the UCC deals with default of a loan and the recovery of collateral. The case in question deals with the auction of 12 registered patents and patent applications the defunct company SemiQuest Inc. on behalf of 3M Innovative Properties — the only secured creditor of SemiQuest’s debt (see press release).
One question about this auction is why this mechanism hasn’t been used before. In a comment to Joff’s posting by Patrick Anderson notes, there have been lots of cases where patents have been directly or indirectly assigned as collateral. And as the press release states “Bank lenders typically use Article 9 all the time to enforce their rights as creditors, but this case is groundbreaking because a nonbank lender [3M] is credit-bidding its debt in the form of a competitive auction.”
I think what is interesting here is the increased trend to breaking out the IP from the rest of the business. While banks use Article 9 as a mechanism to recover losses from defaults, it has never been clear to me that banks think there is a way to use Article 9 for IP. They know how to liquidate tangible assets (real estate and equipment). They don’t know how to liquidate intangible assets. Therefore, while intangibles such as patents may be included in the collateral package, they are not valued very highly. Use of Article 9 might be a step towards making banks more comfortable in lending based specifically on IP (rather than treating IP as a side thought).

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