The most valuable assets of many companies today are patents. If patents are valuable, why do banks operating across the United States refuse to lend against patents in commercial lending to reduce their risks? Lending is the primary function of banks. Yet banks have a strong aversion to accept patents as collateral, rendering the vast number of patents as idle assets. This empirical study is the first to identify the patent aversion problem as contrary to the frequent headlines of how valuable patents are to the economy. By carefully extracting relevant patent and security interest filings data and examining the nuances underlying the data from 1980 to 2016, this Article explains why very few banks are willing to accept patents as collateral and potential consequences to the innovation economy sectors when patent aversion continues to persist among banks. The Article proposes solutions rooted in Secured Transactions and Banking laws to end banks’ patent aversion.
Xuan-Thao Nguyen & Erik Hille,
Patent Aversion: An Empirical Study of Patents Collateral in Bank Lending, 1980-2016,
U.C. Irvine L. Rev.
Available at: https://scholarship.law.uci.edu/ucilr/vol9/iss1/4