Patent-Backed Securization for Innovation and Economic Growth in the Life Sciences: A Proposal for Incremental Securities Law Reform

Authors

Grace Sweeney

Keywords

securities law, conservatism vs innovation, intangible asset finance, “ever greening”, non- practicing entities, patent thickets, patent-backed securities

Abstract

In this section, the historical balance struck by securities law between conservatism and innovation was considered in the context of a shifting economic landscape.

In Section II, the life sciences sector will be chosen to illustrate the current barriers impeding capital flow to high-value enterprise, resulting in decreased innovation and economic growth. These include the existence of “ever greening”, non-practicing entities, patent thickets, and onerous transaction costs on upstream patent holders with limited competency.

In Section III, the tool of intangible asset finance will be introduced as a means of harnessing the value of intellectual property assets, and leveraging them through securitization. This will be proposed as a method of constructing a bridge between early-stage research at the bench, and clinical applications at the bedside. In Section IV, case studies of the instrument of patent-backed securities will be presented with regard to the life sciences sector. Financial instruments, including drug royalty securitization companies and mega funds, will be analyzed, and several benefits outlined, along with more long-term impacts on the economy and public health.

In Section V, quantitative, standardized, and empirically relevant indicia were selected as measures of underlying asset value in patent-backed securities. Twenty- two indicia will be identified for incremental reform of securities law, supplement- ing existing areas of the prospectus — including Financial Information; Material Facts; Risk Factors; Legal Proceedings and Regulatory Action; Material Contracts; and Audit Committees and Corporate Governance — with modified disclosure requirements.

Ultimately, evidence will be drawn in support of the thesis that incremental reform, within the limited sphere of patent-backed securities, can ensure consis- tency in achieving the Securities Act’s purposes of investor protection and market efficiency. Through the use of financial engineering in intangible asset finance, the decoupling of patents could have positive effects on innovation and growth in the life sciences sector and high-value enterprise like it. The economic, social, and pub- lic health benefits associated with this growth warrant meaningful consideration.

Recommended Citation

Grace Sweeney, "Patent-Backed Securization for Innovation and Economic Growth in the Life Sciences: A Proposal for Incremental Securities Law Reform" (2013) 11:2 CJLT.