Hong Kong Government announces first batch of successful IP Financing Sandbox pilot cases, launches Pilot Patent Valuation Support Scheme

Photo by Ruslan Bardash on Unsplash

The Government of Hong Kong has announced that a first batch of seven pilot applications for IP-backed finance going through HK’s Intellectual Property Financing Sandbox (Sandbox) have successfully completed credit approval.  

Hong Kong is a Special Administrative Region (SAR) of China. China’s 15th Five-Year Plan, announced in March this year, includes backing for HK to become a regional IP trading hub. A story on Hong Kong news site The Standard explains that the Five-Year Plan “also stated that the city must build a more competitive ecosystem by strengthening institutions, talent and financing channels.”  

The Hong Kong Government also launched the Pilot Patent Valuation Support Scheme to strengthen support for enterprises in valuation of their intellectual property (IP) assets.  

The IP Finance Sandbox and the IP Valuation Pilot are complementary, the HK government statement says, and “not only signify an important step forward for Hong Kong in promoting enterprises' use of IP assets as a financing tool, but also help accumulate practical experience and enhance the relevant support measures for the further local development of IP financing.” 

The seven pilot cases that have successfully completed credit approval cover the electronics, construction, toy manufacturing and medical device sectors, involving IP assets comprising patents and trade marks, with loan amounts ranging from HK$1 million to HK$39 million.  

According to a statement by the HKMA, the three banks involved in the IP Finance Sandbox are: 

• Bank of China (Hong Kong) Limited 

• The Hongkong and Shanghai Banking Corporation Limited 

• Standard Chartered Bank (Hong Kong) Limited 

These are the companies which applied for IP-finance and were credit approved (with sectors): 

• AluHouse International Trading Company Limited (Construction) 

• Hang Bo Industrial Company Limited (Plastic products and toys manufacturing) 

• Jonwin International Company Limited (Wholesale and retail of figure toys) 

• Luen Yick Electrical Mfg Co Ltd (Electrical) 

• Man Yue Technology Holdings Limited (Electronics) 

• Shing Hing Plastic Manufacturing Limited (Toy manufacturing) 

• SML Med-Tech Solutions Limited (Medical device) 

The HK Government statement says: 

“The Sandbox provides a collaborative and risk-controlled environment for key stakeholders, including banks, enterprises and relevant professional services organisations, to collectively test out the full lifecycle of financing arrangements based on IP assets on a "pioneer and pilot" approach, thereby accumulating practical experience.” 

A Government spokesman adds that the first seven cases achieving credit approval means that “Hong Kong can steadily explore IP financing, thereby unlocking a new financing channel for enterprises with quality IP assets, and facilitating the commercialisation of research and creative outcomes.” 

The spokesman continues: 

“By running pilot projects within the Sandbox, participating banks have been able to test the operation of IP financing in a risk-controlled environment, thereby accumulating experience in risk management, valuation and credit approval. We are pleased to note that, in the course of piloting within the Sandbox, banks have offered greater flexibility regarding loan amounts and financing terms, taking into account the value of the IP assets owned by enterprises." 

Hong Kong’s Commerce and Economic Development Bureau (CEDB), the Hong Kong Monetary Authority (HKMA), and the SAR’s Intellectual Property Department (IPD) jointly launched the Sandbox last December. 

The announcement from the HK Government stresses that the CEDB, the HKMA, and the IPD: 

“Will continue to collect stakeholders' views and consolidate market feedback and experience in formulating the direction for advancing the next phase of the Sandbox, such as exploring an expansion in the number of participating banks and enterprises, encouraging more pilot cases, enhancing the IP valuation process, etc. At the same time, they will continue to work closely with banks and the professional services sector to deepen the market's understanding of IP financing and drive its development.” 

The two-year Pilot IP Valuation Scheme also announced by the Hong Kong Government is being run by the Hong Kong Technology and Innovation Support Centre (HKTISC) and will “facilitate the advancement of the next phase of the Sandbox, strengthen relevant support measures, and enhance the local IP financing ecosystem.” This Pilot Scheme provides each enterprise which has an application approved with one-off funding capped at HK$80,000 to support commissioning a qualified service provider to carry out a valuation of its patents and other IP assets. 

The statement adds: 

“The Pilot Scheme aims to leverage Hong Kong's world-class professional services to promote IP valuations, provide concrete reference data on enterprises' assets for credit financing, and drive a thriving and robust IP trading ecosystem. By providing high-quality and professional quantitative valuations and qualitative patent evaluations, the Pilot Scheme assists these enterprises to showcase the economic value and market potential of their intangible assets to financial institutions and investors, thereby boosting the confidence of financial institutions and investors to form strategic business partnerships with enterprises through investment or provision of financing.”