Sovereign Patent Funds: Sovereign Wealth Funds 2.0?

Date01 November 2016
Published date01 November 2016
AuthorWarren Clarke
Sovereign Patent Funds: Sovereign Wealth
Funds 2.0?
Warren Clarke
McMaster University
Signif‌icant academic and policy attention has focused on identifying the causes and consequences of the growth of traditional
sovereign wealth funds (SWFs). This paper, in contrast, highlights a new type of sovereign investment vehicle sovereign
patents funds (SPFs) that have emerged primarily in advanced industrialized economies, including France, South Korea and
Japan. As def‌ined here, SPFs are investment funds that seek to acquire intellectual property resources deemed strategically
valuable in the pursuit of national economic objectives. This brief survey article considers the implications of SPFs in compar-
ison to more traditional sovereign wealth funds. In doing so, it asks what emerging discourses on sovereign patent funds can
learn from the sovereign wealth fund debate, and points to both similarities and important differences between these entities.
While highlighting similarities between SPFs and traditional SWFs, the paper notes that patent funds are more explicitly politi-
cal than their SWF counterparts. Following an overview of both SPFs and SWFs, the paper compares elements of the structure,
behaviour, and response to these funds. Finally, while a full assessment of the activities and merits of SPFs lies beyond the
scope of this article, the conclusion offers key lessons drawn from the SWF comparison.
Sovereign patent funds: an overview
Intellectual property rights (IPRs) generally and patents
specif‌ically are exclusionary rights providing the holder
with the ability to prevent third parties from making use of
an invention for a designated period of time (Hall, 2007).
The acquisition and active monetization of these assets has
generally been viewed as the domain of individual inven-
tors or technology-producing f‌irms. Increasingly however,
the growing importance of patents particularly in informa-
tion and commutations technology (ICT) has led to the
proliferation of a variety of organizations that act as inter-
mediaries in patent markets. Most notably, a number of pri-
vate patent investment funds now seek to generate a
return on investment (ROI) from their patent portfolios
through licensing, litigation, or subscription fees. While clas-
sic patent assertion entities (PAEs) seek to generate rents
solely through threatened or actual litigation, other funds
focus more heavily on building the value of their portfolio
through technology development and commercialization
and through the bundlingof patents in particular technol-
ogy areas, a strategy intended to increase the portfolios
collective value (Gredel et al., 2011). Still others focus on
assembling a defensive portfolio, acquiring patents to pre-
vent them from being used against their fee-paying mem-
ber companies (Wang, 2010). Private funds may thus play a
constructive role in offsetting a variety of problems viewed
as endemic in patent markets, including information asym-
metries and high transaction costs between parties (Giuri
et al., 2015).
While the state itself plays an important role as a creator,
regulator and guarantor of IP rights, it has not traditionally
acted as a direct participant in these markets. Since 2010,
however, a small but growing number of states have cre-
ated sovereign funds intended to facilitate greater govern-
ment involvement directly in global patent markets. These
SPFs can be def‌ined as sovereign investment vehicles that
seek to acquire intellectual property resources deemed
strategically valuable in the pursuit of various national eco-
nomic objectives (Clarke, 2014). Existing funds specif‌ically
France Brevets, South Koreas Intellectual Discovery and
Japans IP Bridge have been created in high-income juris-
dictions, though some comparable funds have also begun
to emerge elsewhere, most notably in China. These funds
have been capitalized by government sources in the range
of US$100 to $500 million, and as such have been identif‌ied
as sovereignor state-backedinvestment vehicles (Monroig
and Terroir, 2012; Clarke, 2014).
However, while all established funds receive backing from
state sources and are governed at arms length from public
off‌icials, they vary in their level of engagement with private
investors. France Brevets was initially endowed with 100
million in 2011, provided in equal parts by the French gov-
ernment and the Caisse des Depots et Consignations, the
countrys state investment bank, and remains a fully public
entity. In contrast, Japans IP Bridge is an outgrowth of the
Innovation Network Corporation of Japan itself a public-
private partnership which has provided 90 per cent of the
organizations funding, with the remaining capital provided
by private Japanese f‌irms such as Mitsui and Panasonic
(Ellis, 2015b). Koreas Intellectual Discovery has cultivated
even more extensive engagement with the private sector
through its defensive pool programmes, which reportedly
encompass more than 200 f‌irms (Ellis, 2015a). Moreover,
Global Policy (2016) 7:4 doi: 10.1111/1758-5899.12353 ©2016 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 7 . Issue 4 . November 2016 577
Survey Article

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