Legal Definitions - Payment intangible

A payment intangible refers to a type of non-physical asset where the primary value comes from someone else's obligation to pay money to the asset's owner. Unlike a tangible asset like a car or a building, a payment intangible cannot be touched or moved. Its value is derived from a future stream of income or a right to receive payments, often over an extended period, and it isn't easily categorized as a simple account receivable (like an invoice for goods sold) or a promissory note.

Essentially, it's a right to receive money that isn't represented by a physical document like a check or a specific contract that is easily transferable like a negotiable instrument. It's a broad category for various rights to future payments that don't fit neatly into other classifications of financial assets.

• Example 1: Software Licensing Royalties

  Imagine "InnovateTech Inc." develops groundbreaking software and licenses it to "Global Solutions Corp." Global Solutions agrees to pay InnovateTech a percentage of all revenue generated from products that incorporate InnovateTech's software for the next fifteen years. InnovateTech's right to receive these future, ongoing royalty payments is a payment intangible. It's a non-physical asset whose value is entirely based on Global Solutions' obligation to pay money over time, and it's not a simple invoice for a one-time service.

• Example 2: Structured Settlement Assignment

  Sarah wins a significant personal injury lawsuit and, instead of a lump sum, agrees to a structured settlement that pays her $5,000 per month for the next twenty years. If Sarah later decides she needs a large sum of cash immediately, she might sell her right to these future payments to a specialized financing company. For that financing company, Sarah's future stream of $5,000 monthly payments becomes a payment intangible. The company now owns the right to receive money from the entity responsible for the settlement, and this right is the core of its asset.

• Example 3: Patent Royalty Stream

  Dr. Chen invents a new medical device and patents it. She then licenses her patent to a large pharmaceutical company, "PharmaGiant," allowing them to manufacture and sell the device. In return, PharmaGiant agrees to pay Dr. Chen a royalty of 3% on all sales of the device for the life of the patent. Dr. Chen's right to receive these future royalty payments from PharmaGiant represents a payment intangible. It's a valuable, non-physical asset that generates an income stream based on another party's obligation to pay money for the use of her intellectual property.