There is a discreet lending market in New York and few places beyond that trades cash for copyrights until the cash is returned with interest. To play in this field might actually be less of a risk than banks lending on collateralized real estate, based on the fluctuation of real estate values. Certain and valuable copyrights hold their value quite nicely, even in a recession.
A recent story in the New York Times (which also reached a few IP blogs such as IPKat) disclosed a recent loan transaction between Art Capital Group and Annie Leibovitz, the famed celebrity photographer for Rolling Stone and Vanity Fair over the last thirty years, in which Leibovitz used the copyrights to her life’s work, including all future photographs taken, as collateral to secure over $15 million in loans. According to the story, Leibovitz “essentially pawned every snap of the shutter she had made or will make until the loans are paid off.” You may know Leibovitz’s work from popular celebrity images such as the Rolling Stone gallery of John Lennon and Yoko Ono, or the disputed cover of Vanity Fair portraying a pregnant Demi Moore. Or better yet, if you are a copyright junkie like us, you may know of the lawsuit brought by Leibovitz against Paramount Pictures for creating a parody of the Demi Moore image, using Leslie Neilson, to promote the movie Naked Gun 33 1/2. The opinion has lent itself to many copyright law class discussions. In any regard, Leibovitz’ catalog of copyrights is worth a lot, as evidenced by the size of her loan (which also banked on some real estate as collateral).
More interesting than Leibovitz’s copyrights, however, is the niche lending market that Art Capital Group, and a few others, have created for copyright owners. Art Capital Group offers term loans, recourse and non-recourse loans, as well as bridge loans for art heading to an auction to be sold. According to their website, they also offer financing options to collectors, who wish to buy expensive copyrighted works at auctions or otherwise. Art Capital Group lends exclusively on art and independentlyof heavy regulation. According to the Times article, they handed out over $120 million in loans last year. This kind of lending is private and practices outside of many lending regulations.
Some such lenders are regulated otherwise. ArtLoan, another U.S. art-based lending entity based out of San Francisco, advertises that $23 million in antiques, collectibles and fine art changes hands globally every year, and conventional methods for borrowing on art assets is a struggle to most. As stated in the Times article, they are also regulated by California’s pawn laws. Of course, some observers might equate the work of ArtLoan and others as just a high class pawn shop, as it would seem closer to this situation in the case of antiques and collectibles. This author is not one of those observers. When intellectual property is involved, the dynamics of the transaction become a little bit different, in that valuation methods are changed and ownership of the IP by either the lender or borrower must be correctly documented. In other words, the transaction becomes a little more involved. Still, entities such as ArtLoan and Art Capital Group are offering services to copyright owners that provide liquidity to otherwise unrealized assets at a time when cash is tough to find. A year ago, these business models received average success because money could be obtained elsewhere. Now that traditional streams have dried, people are looking to every asset they can from which to squeeze out cash, including their intellectual property.
The increase in activity these entities are seeing is yet another example of the heightened awareness to the value of IP and its transformational character. As I have preached time and time again, IP-based lending and investment will continue to grow exponentially over the next few years, unless lawmakers see a reason to tighten the grip and regulate the market.