Study On The Legal Issues Of Bankruptcy Isolation Mechanism Of Intellectual Property Securitization

During intellectual property securitization,it's very important to establish the bankruptcy isolation mechanism."Bankruptcy isolation" has two meanings: first,in asset securitization,the Promoter transfers the intellectual property assets to SPV,which should conform to the standard of "true sale",realize the separation of the basic assets and the bankruptcy risk of the Promoter,and avoid damaging the interests of investors;second,the SPV itself should be far away from bankruptcy risk itself.In the current laws and regulations related to intellectual property securitization in China,there are few provisions related to the true sale,and the criteria for judging the true sale is not clear;as for SPV itself,the "special plan for asset support" stipulated in the regulations on asset securitization business management of securities companies and fund management companies is the "special plan" used by domestic enterprises in asset securitization.But the concept of it is very different from that of SPV,and the risk isolation function of it is not perfect.Compared with the basic assets such as loan creditor's rights and expressway charging rights,intellectual property has the following characteristics: first,it can be repeatedly authorized.Intellectual property rights can be used over and over again.For example,a company can authorize its patent to several other enterprises,and afilm production company can authorize the information network transmission right of a movie to several different video websites.If the Promoter authorizes other authorized parties after the completion of the intellectual property securitization transaction,the increase of the total number of authorized persons may cause the original authorized parties to face competition and reduce their income.The Promoter's behavior can still affect the value of the underlying asset,that is to say,the risk of the underlying asset is not completely transferred to SPV,which does not meet the requirements of true sale.Second,severability.Intellectual property rights can be divided among different rights.For example,for a movie,several companies can have the right of distribution,the information network transmission right and adaptation right respectively.Once the rights are divided,overlapped,contradictory and disordered,it is possible to resolve the dispute through litigation,leading to the fluctuation of securities price and damaging the rights and interests of investors.In addition,if the Promoter does not have complete rights to the movie and the basic assets are transferred to SPV,the risk is not completely transferred,which also does not meet the requirements of true sale.Third,valuation is difficult.The value of intellectual property has its own uncertainty,which may fluctuate sharply due to the changes of market environment and technology level.For example,the value of films and TV shows is affected by market acceptance,the popularity of individual actors and other factors.Before they are officially released,it is difficult to accurately predict the market response,and it is also difficult to accurately value them.If the court considers that the sale price of the basic assets is obviously unreasonable after the Promoter enters the bankruptcy proceedings,the transaction may be canceled by the court,resulting in the basic assets being included in the bankruptcy property of the Promoter and damaging the rights and interests of the investors.Because of the above characteristics of intellectual property,there should be special provisions different from other types of asset securitization.This paper will combine the characteristics of intellectual property rights,such as repeatable authorization,severability and valuation difficulty,and analyze the establishment and improvement of the bankruptcy isolation mechanism of intellectual property securitization from the twoaspects of true sale and SPV construction.The first chapter of this paper discusses the separation mechanism between intellectual property basic assets and the bankruptcy of the Promoter.The key is to realize the "true sale" of the basic assets.In the first part,it analyzes the characteristics of the intellectual property based assets,such as the repeatable authorization,the divisibility and the difficult valuation.In the second part,it first summarizes the concept of true sale under American law and Chinese law.In the U.S.legal system,the terms of true sale are mainly stipulated in the Uniform Commercial Code,the U.S.Code and the Bankruptcy Reform Act in 2001,but these laws do not have a clear definition of true sale.There are similarities in the logic of defining "true sale" by several domestic scholars.They all think that "true sale" essentially means that the Promoter transfers all the rights and risks of the basic assets to SPV,so as to achieve the effect of bankruptcy isolation.Then,it studies two kinds of judgment criteria about the "true sale" of intellectual property: formalism and substantialism.Under the formalism principle,the recognition of true sale mainly considers the literal meaning of the transfer clause in the basic asset transfer contract,and judges whether there is a true sale intention between the Promoter and SPV.The principle of substantialism not only considers the literal meaning of the terms of the agreement,but also considers the essence of the transfer of basic assets from various perspectives.The essence of this principle is to have a full review of all the risks and benefits that the parties have in the asset securitization transactions.In the third part,the author analyzes the consequences of the failure to sell the intellectual property basic assets:the bankruptcy isolation mechanism between the basic assets and the Promoter is not really established.The risks of assets failing to achieve true sale mainly include revocable transaction risk,re-characterization risk,mixed risk and entity-merger risk.These risks may lead to the intellectual property basic assets being included in the bankruptcy property of the Promoter.That is to say,if true sale is not achieved,an effective bankruptcy isolation mechanism cannot be established.The second chapter discusses the related problems of SPV in intellectual property securitization.Before discussing how to improve the bankruptcy isolationmechanism of SPV,it is necessary to make clear whether the "special plan for asset support" used in China's intellectual property securitization is a qualified SPV? In the first part of this chapter,it describes the organizational form of SPV,and discusses the differences,advantages and disadvantages of the SPC and SPT.This paper reveals that there is a much higher cost of SPC during the intellectual property securitization.The technical and legal issues involved in the basic assets of intellectual property are more complex,which are more difficult than other traditional assets in terms of asset portfolio and valuation;the willingness of securities companies to underwrite such bonds is not very high,which requires more negotiation and negotiation costs.In the second part,I study the bankruptcy isolation mechanism of SPV itself,but considering that the trust itself does not have bankruptcy risk,we only consider the bankruptcy isolation mechanism of SPV itself,which mainly includes two aspects:one is the prevention of SPC voluntary bankruptcy risk;the other is the prevention of SPC involuntary bankruptcy risk.In the third part,it analyzes "SPV with Chinese characteristics"-special plan for asset support.First of all,it explores the difference between the special plan and SPV,the biggest difference between them is that the special plan lacks independent legal subject status.Then,the paper studies the legal relationship involved in the special plan: the legal relationship between the investor and the manager of the special plan constitutes the principal-agent legal relationship,and the legal relationship between the investors on the basis of their shares.Finally,it points out the defects of the special plan of asset support: the risk that the basic assets are listed in the bankruptcy property of the Promoter,the risk that the assets of the special plan are mixed with the own funds of the plan manager,and the theoretical defects of the legal relationship between the principal and agent.In my opinion,the "special plan for asset support" is not a qualified SPV.The third chapter of this paper is to improve the bankruptcy isolation mechanism of intellectual property securitization in China,mainly in two aspects: firstly,the special elements that should be applied to the true sale of intellectual property basic assets,and secondly,the construction of SPV and how to perfect the bankruptcy risk isolation mechanism of SPV itself.From the perspective of true sale,first of all,weshould take the principle of substantialism as the principle of judging true sale.Secondly,in addition to the requirements for the true sale of general asset securitization,the true sale of intellectual property securitization should apply the following three special elements.For the repeatable authorization of intellectual property,it should be clearly agreed in the transfer agreement of basic assets that the Promoter cannot repeat the authorization or restrict the Promoter to authorize to some subjects.For the severability of intellectual property,Promoter shall be required to have complete rights to the works,trademarks and patents attached to the license fee,or to be jointly the promoters of asset-backed securities by multiple obligees,or to reach an agreement between the obligees to ensure that the promoters have complete copyright to the works.For the valuation of intellectual property,a third party shall be introduced before signing the basic asset transfer agreement to estimate the value of basic assets.On the issue of SPV in intellectual property securitization,I believe that the SPC is really suitable for the development of intellectual property securitization in China.According to the current domestic law,there are four difficulties in establishing SPC to serve the securitization of intellectual property.First,there are unavoidable double taxation issues.Second,the cost is high,SPC should have the "three meetings" system of qualified personnel,business place and corporate governance,etc.,and the operation cost is high;in addition,the characteristics of intellectual property rights,such as repeatable authorization,severability and valuation difficulty,will lead to the expansion of due diligence scope,more difficulty in defining rights,longer negotiation time with securities companies,etc.Third,it is very hard for the SPC to reach the strict conditions for publicly issuing the corporate bonds.Fourth,the legal accumulation fund system affects the Promoter's financing effect.Therefore,I believe that in the short term,we should establish a state-owned SPC.The government shall reduce the cost of SPC in intellectual property securitization with preferential policies such as tax relief and subsidies,prevent the risk of SPC's voluntary bankruptcy through the arrangement of independent directors,and prevent the risk of SPC's involuntary bankruptcy by strictly limiting the scope of business,the amount ofliabilities and guarantee activities in the articles of association of the company.However,due to the lack of market competition,such state-owned enterprises with monopolistic nature have defects such as lack of innovation and relatively low service efficiency.In the long run,we should make special legislation for SPC.On the one hand,it is necessary to reduce the establishment and operation cost of SPC,so that SPC can replace the special plan of asset support and become a SPV suitable for the securitization of intellectual property.This requires the adoption of legislation to reduce the requirements for the creation of SPC,such as the number of directors and supervisors;the granting of SPC tax relief and preferential treatment to ease the burden of double taxation;not applicable to the requirements of the company law to withdraw legal accumulation fund.On the other hand,we should perfect the bankruptcy isolation mechanism of SPC by legislation,that is to say,we should restrict the voluntary bankruptcy of SPC by legislation,and strictly restrict the business scope,debt amount and guarantee activities of SPC to prevent the risk of involuntary bankruptcy of SPC.