Scope now includes intellectual property and nonfinancial firms.

The expansion of the Trust Business Law in December to include nonfinancial companies and assets such as intellectual property has triggered a rush of activity into previously uncharted areas.

It's little wonder-the revisions are the first in about 80 years and have enabled small businesses with promising patents and copyrights to get in on the action to raise funds prior to the launch of a product or project.

Artist House Inc., which markets reproduced foreign films, has teamed up with Sumitomo Trust & Banking Co. to set up a new copyright trust service. They envisage a scenario in which the bank will offer investors dividends on trusts, designed to pool funds for Artist House to produce DVDs and videotapes of foreign films for the Japanese market. The dividends will be determined based on sales of those discs and tapes.

In the past, companies like Artist House had to finance everything themselves, recouping all or some of their investments in the reproduction rights with content sales.

``We can now tap into funds outside of the video industry through trust arrangements,'' said Koichi Yoshimizu, director and chief financial officer of Artist House. ``If this becomes the standard way to do business, it will be a big boost for the industry.''

Another small business, Japan Digital Contents Inc., aims to obtain a license to become a trust operator as early as February.

The company, which supports film and computer software production firms, plans to woo investors with the anticipated profits from the DVDs and videotapes, as well as the games and toys tied to film characters.

``We are schooled in how things work in the video content business,'' said Hirobumi Doi, president of Japan Digital Contents. ``We're able to act more agilely than trust banks.''

Previously, when businesses in the video industry wanted to raise funds for production from investors, they had to set up a special-purpose company managing copyrights. The costs of establishing and operating such a company often amount to more than 3 percent of the overall production budget.

Since trust arrangements do away with such costs, the savings can be passed along to investors.

Japan Digital Contents, for example, aims to offer investors a bold 15 percent annual return on its trusts.

The revisions to the Trust Business Law are also expected to result in some unique applications of the trust business.

Mizuho Trust & Banking Co. plans to introduce a will trust for writers that will include posthumous management of copyrights to novels.

In exchange for managing the copyrights and distributing the profits from books, the trust bank expects to collect fees long into the future from the novelists' estates.

UFJ Trust Bank is focusing on trusts for patents held by small businesses.

The first contract to be formalized in late January is expected to help Tokiwa Seiki Co., a construction machinery parts maker in Tokyo's Ota Ward, raise funds from investors to help utilize its patent holdings.

Under the agreement, UFJ Trust will act as a proxy for the 50-employee firm and negotiate licensing of its patents with large corporations.

The deal comes as part of an earlier, broad tie-up with the Ota City Industrial Promotion Organization, an association of small companies in Ota Ward, under which the trust bank will manage its members' patents on their behalf.

``There are unlimited possibilities in trust arrangements beyond just copyrights and patents,'' said a senior official at a trust bank. ``All you need are good business ideas.''

Others say, however, success lies in whether trust banks and companies can convince investors to come on board, as trusts can be high-risk vehicles, especially when centered on video content. Only a handful of film, video and anime titles ever become blockbusters, meaning highly profitable projects are few and far between.

To reduce investor anxiety, Japan Digital Contents plans to offer a clause promising to buy back stakes in its trusts for about half the original purchase price.

Analysts say it is also important for trust managers to develop arrangements that are easy for general investors to understand.(IHT/Asahi: January 7,2005)