Our IP Valuation Guideline

Our Transaction Services team has prepared a guideline on intellectual property valuation for IP financing in Hong Kong. Version 1 runs to more than 30 pages. It explains how IP financing works here, what an IP valuation is used for and how it is carried out through the income, market and cost approaches. It works two examples from beginning to end, a Hong Kong standard patent granted through the original grant patent route and a cartoon character valued on the market approach, with the assumptions and sensitivity shown. Two parts are meant to be used rather than read: a set of questions and answers covering what banks, business owners and valuers most often ask each other, and an information request list a business can work through before a valuation begins. We will update the guideline from time to time as the sandbox, the pilot scheme and market practice develop. Comments and suggestions are welcome, and a copy is available on request.

Read the full guideline here.

Can I borrow against my patent in Hong Kong?

Yes. Since December 2025 banks participating in the Hong Kong Monetary Authority’s IP Financing Sandbox have been testing the full lifecycle of IP-backed lending, from verifying the rights and obtaining an independent valuation through to credit approval and taking security over the IP. The bank still applies its own credit assessment, and the valuation is one input to that decision.

What is the IP Financing Sandbox?

A risk-controlled environment launched by the HKMA with the Commerce and Economic Development Bureau and the Intellectual Property Department in December 2025. Participating banks test IP-backed lending end to end. It covers patents, trademarks and copyrights, and is aimed particularly at small and medium enterprises that are rich in IP but short of tangible collateral.

Is there any government funding for the valuation?

Yes. Under the Pilot Patent Valuation Support Scheme, a two year scheme, eligible Hong Kong SMEs can receive matching funding of up to HK$80,000 towards a patent valuation. Applicants must hold at least one patent granted after substantive examination, and holders of Hong Kong standard patents granted through the original grant patent route are given priority.

Which types of intellectual property can be valued?

Patents and technology, trademarks and brands, copyright and content, software, registered designs, trade secrets and know-how, licences and customer relationships. What matters for financing is not the label but whether the right exists, who owns it, where it is protected and how it earns money.

How is an IP valuation actually carried out?

Through one or more of three approaches: income, market and cost. For IP that already earns revenue the income approach is usual, applying relief from royalty, multi period excess earnings or a with-and-without comparison. The market approach needs comparable transactions, which patents rarely have. The cost approach is normally a cross check rather than a conclusion.

What drives the value most?

Three inputs carry most of the judgement. The economic life, which is often shorter than the legal life. The royalty rate, taken from comparable licences and tested against a profit split. The discount rate, which starts from the company’s cost of capital and adds a premium for the risk of the IP itself.

What information do you need from us?

Registration certificates and renewal records, assignments of rights from inventors and contractors, revenue from the related products and licences, existing licence agreements, development and maintenance costs, the commercialisation plan and details of any disputes. Our guideline contains the full information request list, which you can work through before the valuation starts.

How long does a valuation take?

Typically three to four weeks from the point the information is complete, and we can work to an earlier deadline where the bank’s timetable requires it.

Will the bank lend the full valuation amount?

No. The valuation is not the loan. The bank applies its own loan to value ratio and considers the borrower’s cash flow and other collateral. It will also look at how readily the IP could be realised, the chain of title, the territories where the right is protected and any disputes.

Is the valuation a single figure or a range?

We report a single figure, because the bank has to lend against it, supported by a sensitivity analysis showing how much the conclusion depends on the key judgements. A narrow sensitivity range does not by itself mean a better valuation.

Our most valuable IP is not on the balance sheet. Does that matter?

No. Under HKAS 38 paragraph 63, internally generated brands, mastheads, customer lists and similar items are not recognised as intangible assets, so a company’s most valuable IP can carry a book value of nil. That is precisely why a lender relies on an independent valuation rather than on the accounts.

Which standards do you value under?

The International Valuation Standards, with intangible assets covered by IVS 210, together with the RICS Global Standards. IVS has no separate standard for intellectual property, so IP is valued as a subset of intangible assets.