Collateral Protection Insurance
Collateral Protection Insurance (CPI)
is a powerful new tool that your company can use to borrow money against
the value of your patents, copyrights, trade secrets - without having
to give up your hard-earned equity. The power of the CPI policy is that
it turns your IP into insured collateral that banks or other lenders
are quite comfortable accepting (banks have always been uncomfortable
dealing with technology - technology asset analysis is not their
Note: the CPI policy is NOT a financial guarantee - it only insures the value of your IP while you are paying off the loan. If you default on the loan (and IPISC works with you to prevent this), the balance of the lender's loan is repaid. In parallel, the rights to the insured IP is transferred to IPISC and its insurance carriers, who resell the IP to a company better positioned to commercialize the IP, using the proceeds to cancel out the loan repayment.
Requirements to Qualify for a CPI Policy
To provide insurance companies and banks with the technology value guarantees that underlie your CPI policy, IPISC requires that your company satisfy the following conditions:
- -- your company cleanly owns your IP, or is properly assigned to your company with all rights - CPI policies do not insure licensed IP
- -- your IP must be owned free and clear (no liens nor security interests, and it shouldn't be the only asset available to repay debt)
- -- your company should be generating revenues (preferred) from or be market-ready with products covered by your IP
- -- your company must be able to enforce your patents, for example, be able to sue an infringer
- -- the enforcement and defense risk of litigation you might confront must be standard.
- -- the required terms must conform to our lender and carrier requirements including subject matter, term, limits, US domicile, cash flows, and the IP collateral must be worth more than the limits
- -- your company cannot be involved currently or prospectively in litigation of any kind
- -- your company must be able to pay off the loan by the end of the term, as shown in realistic financial projections
- -- your company can't use the loan to buy out earlier investors or to pay off existing debt
- -- your company can't use the insured loan to purchase the IP being used as collateral, as the loan is meant to be used to grow your company and which should increase the value of the IP
- -- Owners of IP rights who wish to leverage the value inherent in the IP to be used as loan collateral.
- -- Entities with a financial interest in the value of the IP when using collateralized IP for a loan.
Features & Conditions
- -- CPI can be coextensive with the term of the loan, usually three years; or, it can be typically renewed if the term is longer.
- -- Escrow agent, if any, ensures that the IP's maintenance fees are paid during the loan term and steps in for the purpose of orderly liquidation of the IP if necessary.
- -- Coverage extends to defaults not cured within a sixty (60) day period.