How to use a trademark to secure credit financing
Securing credit is in the interest of both the bank and the borrower. The bank receives confirmation of the intention to pay the debt, with compensation guaranteed in case of non-payment, while the borrower, in procuring an obligation, can claim a larger loan amount.
Article 358.18(1) of the Russian Civil Code states that “exclusive rights to the results of intellectual activity and similar visual identity... may be the subject of pledge”. The subject of a pledge may therefore include the exclusive rights to a trademark, when the general rules of Russian pledge law apply to the agreement as per Articles 334 to 356. In addition, Article 358.18(3) provides that a pledge may include “rights under an agreement on the alienation of exclusive rights and under a licensing (sublicensing) agreement”. Here, the relationships are governed by Articles 358.1 to 358.8, which outline the obligations in rights pledges. The parties must agree on the scope of rights that will form the subject of the pledge and the rights holder cannot alienate these rights during the validity of the agreement without the relevant bank’s consent.
A borrower can apply to any Russian or foreign organisation for a loan secured by a trademark. However, when using a visual identity as the subject of the pledge, it must be registered at the Russian Patent and Trademark Office (Rospatent) and its value must be assessed. These requirements act as an insurance guarantee for the bank. Registration at Rospatent confirms the protectability of the object and the owner’s power to protect the mark, while the valuation examination indicates its monetary worth. Article 340(1) states that “the value of the subject of pledge is determined by agreement of the parties, unless otherwise provided by law”.
However, in practice, the bank and the entrepreneur rarely agree on the value of the intangible assets, preferring instead to use independent appraisers. Grigory Ivliev, head of the Russian Federal Service for Intellectual Property, previously commented that: “Russian banks trust the valuation report drafted by a company with which the bank already has a positive history of cooperation.” Therefore, each bank has a list of independent appraisers eligible to evaluate intangible assets before formalising a credit financing agreement. In addition, in 2015 the Ministry of Economic Development of the Russian Federation put into effect the Federal Standard of Evaluation of Intangible Assets and Intellectual Property (FSO 11), which describes the process and conditions for evaluating intangible assets by an independent appraiser.
Therefore, if an entrepreneur has a trademark registered in Russia and is ready to evaluate it, it can seek credit financing against the security of its intellectual property.
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