Intellectual property (IP) can be a very complicated area of the law. However most corporate borrowers will have some type of IP assets, with those frequently being their most valuable assets. Therefore, it is critical for lenders to understand the proper securitization of IP to ensure repayment should the borrower default.

As federal and state law governs aspects of securitization of IP, there is often uncertainty as to which agency is the proper one to record a security interest. Article 9 of the Uniform Commercial Code (UCC) or a state’s version of the commercial code governs the methods of perfecting security interests. Typically to perfect a security interest, a lender must file a UCC-1 financing statement with the Secretary of State where the borrower resides. However, Article 9 states that if subject to a statute, regulation or treaty of the United States the filing of a financial statement is not necessary to perfect your security interest. The following is a general overview on properly perfecting IP assets:

Copyrights: The Copyright Act specifies the method for recording security interests in registered copyrights, and therefore, Federal law preempts state law in connection with registered copyrights. To perfect a security interest in a registered copyright, the lender must record the security interest at the U.S. Copyright Office. For security interests in copyrights not registered with the U.S. Copyright Office, the lender must perfect through a state UCC filing.

Trademarks: A common misunderstanding is that recording a security interest in federally registered trademarks and trademark applications with the US Patent and Trademark Office (USPTO) will be sufficient. However, unlike the Copyright Act, the federal trademark statute (Lanham Act) does not specifically address security interests in federally registered trademarks, and therefore, the proper method of perfecting security interests in federally registered trademarks and trademark applications is through a state UCC filing.

Recording with the USPTO alone is neither legally necessary nor sufficient to perfect a security interest in registered trademarks or trademark applications.

Patents: Patents are governed by a federal statute: U.S. Code, Title 35 (the Patent Statute). Like the Lanham Act, the Patent Statute does not explicitly address the issue of perfecting security interests and Courts have generally found that state UCC filing requirements are not preempted by the Patent Act. As such, a state UCC filing should be made to perfect a security interest in a patent against subsequent lien creditors. However, to perfect a security interest against a bona fide purchaser or mortgagee, a secured creditor should also record the security interest with the USPTO.

Perfecting your security interests can be very complicated. If you need assistance in drafting or reviewing loan and security agreements, contact the experienced litigation attorneys at Goosmann Law in our Sioux City, Sioux Falls, and Omaha offices.


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