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Japan’s Innovation Network Corporation (INCJ) announced earlier this summer that it is investing approximately 3 billion yen, or $30 million, into a fund that will buy up dormant patents held by Japanese corporations and license them out to other domestic companies. The fund will focus on acquiring consumer electronics patents and is backed by industry heavy-hitters Panasonic and Mitsui & Co. A public-private partnership, INCJ, has further revealed that it plans to invest up to 30 billion yen with the ultimate aim of commercialising unused IP assets, as well as delivering returns to its investors.
Although these are lofty goals, members of the Japanese IP community consulted by IAM are less than enthused by this newest government-backed initiative and do not believe that it has much potential for actual success.
There are a few reasons for this negative reaction, such as the fact that this isn’t the first time that a patent fund with exactly the same goals has been launched in Japan. Although not much detailed information is available, in 2001, Inspire Corp, a Japanese venture capital firm, also established a $25 million fund, which pulled in Boeing and Mitsubishi as investors. Aimed at commercialising unused patents held by domestic companies, universities and research institutions the fund was meant to provide venture capital to those with innovative technologies in several high-tech industries.
However since 2001 not much has been heard of it and a brief announcement on the Inspire Corp website states: “Due to the expiration of its term, [the Inspire Advanced Technology Fund] was closed on March 31, 2012.” Well-placed sources, however, indicate that this IP- vehicle quietly mutated into an M&A fund and then eventually shut down, mostly due to the fact that the group didn’t possess the expertise required to run it properly.
Another problem, IAM was told, is the close relationship between the Japanese government and domestic companies. In Japan, when the administration floats an idea, business is expected to give it a degree of backing. When it comes to this particular fund, it’s believed that Panasonic and Mitsui & Co have donated token amounts to the pot to appear supportive, but the majority of the funding is coming from the government via INCJ. As such, Panasonic and Mitsui & Co – the two entities with the most experience of IP commercialisation out of those involved - are not predicted to engage with the fund on any significant level, leaving it to be run by INCJ.
Although the cash may be there, to be successful the fund needs individuals capable of identifying assets in the marketplace worth acquiring on an on-going basis and those with the right kind of deal-making expertise to be a viable long-term endeavour. Typically, it is the corporate sector that possesses these skill-sets, not governmental employees. Although these thoughts have been voiced somewhat covertly given the conservative nature of business in Japan, key figures in the IP community agree that this fund is not destined to be an effective means of commercialisation; nor do they think it will it provide any meaningful revenue for domestic industry. Rather, they see it as another well meaning but poorly thought-through government-related IP initiative.
It’s worth noting that that the concerns swirling around the establishment of this fund are not only relevant to Japan. The Malaysian government has committed $65.4 million to an IP financing plan, Singapore is rushing full-speed ahead towards its goal of becoming an IP hub for the region and China’s governmental IP initiatives are well documented. Clearly the question of whether a top-down, government-led approach to IP value creation can be ultimately successful is something that many Asian countries are experimenting with no matter how developed their IP markets may be. Who knows: perhaps seasoned IP observers will end up being surprised.
Patents, IP finance