Bruce Berman‘s column in issue 24 of IAM-Magazine discusses the well-known April 2007 US $1.8 billion securitisation by Sears of it’s Kenmore, Craftsman and Die Hard brands.

For those who are unaware, IP securitisation really hit the headlines when David Bowie received an up front payment for future royalties on a selection of his playlist. The then-ground breaking deal was purportedly created to provide cash that he could use to pay a tax debt. Necessity certainly is the mother of invention.

Apart from the unprecedented size of the Sears deal, it was also interesting because it was the first time that an IP securitisation was based on intellectual property which had no pre-existing royalty stream. Traditional thinkinghas held that without royalties, it is too difficult to value the IP. In the present case, the purchaser of the bonds was a wholly owned bankruptcy-remote, Bermuda special purpose vehicle.

As Bruce points out, it seems as though similar structures could be used to gain up front cash for other underutilized IP assets – in particular patents. This may be true, but I’m cautious about applying the Sears securitisation to situations in which the securities are bought completely at arms length by unrelated entities. How will an appropriate value be agreed?

What do you think – is it possible to agree a value – when clearly the interests of the IP owner and the security purchaser are so at odds? What else could be done?