Patents as Assets: Intellectual Property Rights as Market Subjects and Object

(You can find the paper here: https://kar.kent.ac.uk/59604/)

I. Review

In this chapter of the publication Assetization: Turning Things into Assets in Technoscientific Capitalism, the author Hyo Yoon Kang discusses the hybrid role of patents, seen as legal monopolies and proprietary models for the materialization of inventions, and a specific turn to assetization that understands patents as assets. Dr. Kang studies how the valuation of patents results in treating them as financial assets, that are premised on layers of legal and financial abstraction. By extent, through novel forms and practices, we can monitor how law itself is turned into a speculative financial asset.

Intellectual property rights are vital to the assetization process, being regarded as “intangible” assets, from which value is extracted when they are enlisted in specific modalities of value or acted upon in specific ways. So asset valuation is happening, according to the author, through practices and specific knowledge techniques that are outside the “legal” realm. The author begins discussing the different perceptions and vocabularies regarding patents and the abstract, generalized legal forms.

In current legal frameworks, patents can be possessed, used, transferred, exchanged, and sold. This framework is based on incentivization of innovation by temporally restricted monopoly rights for the “inventors” and patents being beneficial to the public interest. While policy-makers and economists concentrate on patents as a trading instrument, they assess policy effectiveness in terms of patent value and valuation. The author categorizes these approaches as legal materialism, which fails to understand patents as abstract rights that have uniform realities. With this critique, patent law can be seen as the central legal technique of commodification within the so-called knowledge economy:

The concept of Intangible knowledge, being difficult to capture, with intellectual property law facilitating it with a web of legal forms (abstract property rights administered through a registration system, specific format and writing), uses (disclosure, ownership, possession, non-use, exclusion), and exchanges (through sale or licenses), aiming to outline and thereby define the products of intellectual labor.

These critiques of legal techniques of commodification through intellectual property have employed ideas such as the: public domain, commons and openness and other multidisciplinary techniques. The commonality of these critiques is based on unpacking the relationship between patents and intellectual property rights that create a self-referential tautology — which the author explains vividly:

“intellectual property drives innovation, innovation is necessary to create growth in the modern knowledge economy, and innovation is measured by the patent information, such as the number of patent citations, number of applications, and patent renewals”.

After explaining the current situation and the critiques, Dr. Kang explains how patent portfolios are creating assets and strategic business choices. It is important to notice that assetization is measuring value on the projected exchange value of the patent as a property right rather than the actual or anticipated use-value of the patented invention. Projected value seems safer and thus is included in asset portfolios in order to lower risks, to diversify, and even speculate on “knowledge intangibility”. Property rights become assets by themselves: forward-looking investment vehicles and a market is created around them — with instances such as “patent trolls” that buy patents with a view of obtaining a settlement or damages through litigation against alleged patent infringers.

The author shows us how this market and the necessary techniques that construct it, redefined the shift from tangible to intangible assets, with patents being strategic assets, as arsenals in a ‘war’ of mutual patent portfolio containment directed at competitors. In this situation, we can see the following controversies that the author explains in length, namely accounting for patent value versus modeling for patent value and market in patent monetization versus market in patents as financial assets.

After showing the turn to assetization, the author poses an interesting question: where patents act as assets and where they don’t. While there is no formal and ontological difference between real and intellectual properties, knowledge products, such as inventions, are commonly regarded as being less alienable and more assetized. In order to differentiate situations where patents act, or not, as assets we need to find the exclusive mechanisms by which profits are realized, and to distinguish an understanding of patents as a source of profits via commodification and patents as financial assets.

Law is central to the financial assetization of patents, where the law becomes the object of financial speculation and the operation of patent law is reconfigured as a matter of hedging for or against a patient’s legal force. Through case studies and examples, Dr. Kang shows us the linkage of financial hedges (measured by expected share price fluctuations) to legal decisions and outcomes.

Lifting the layers of abstraction, could reveal the legal system in its full contingency and its complex entanglements with the financialized economy. Dr. Kang concludes with the following brief but concrete statement:

Whereas law has enabled the creation of a market in patents as assets, but it has now become a financialized market object itself.

II.Reflections

We see how the intangibility, facilitated assetization and law becoming a financialized market object itself. In my opinion, this also has the following consequences:

• Patents can be used to manage risk, and we have seen the rise of financial products such as catastrophe-bonds, which I presume are based on assetization and intangibility of patents.
• There are certain contradictions when valuing society-needed breakthroughs — we saw them unfold in the creation of the COVID-19 vaccine. In borderline cases in pharmaceuticals, patents to products can be synonyms to hope and cure. In this scenario, even cure becomes an asset — and thus tremendous margins for exploitation appear.
• Was assetization an impediment to the vaccine-development? Are there any conclusions to be drawn in order to reconstruct the relationship of law, patents and social needs?