by Andrew R. Spriegel
Patent Attorney – Moxon & Spriegel, LLC
Table of Contents
I. Introduction [2]
II. General Intangibles Defined [5]
III. The Increasing Significance of Intangible Assets in the U.S. and Worldwide [5]
- Patents [7]
- Trademarks [10]
- Copyrights [12]
IV. U.C.C. Revised Article 9 – Creating an Enforceable Secured Interest in a Debtor’s Assets – The Security Agreement [15]
V. U.C.C. Revised Article 9 – Perfection of the Security Interest – Filing a Financing Statement [17]
VI. Perfection of Patents [18]
- The First Speed Bump: Confusion about Secured Interests in Patents [18]
VII. Trademarks [21]
- The Second Speed Bump: Confusion about Secured Interests in Trademarks [21]
VIII. Copyrights (Registered and Unregistered): The Third Speed Bump: Confusion About Secured Interests in Copyrights [25]
- Perfection of Copyright Subject to Federal Statute, Regulation or Treaty [25]
IX. ABA Approach to Creating Secured Transactions in General Intangibles [28]
X. Summary [28]
I. INTRODUCTION
An ongoing tension exists between U.C.C. revised Article 9 and Federal Intellectual Property statutes.[i] In order to avoid any conflicts with Federal law, the U.C.C. has promulgated two ““step-back provisions,” by which state law steps back and out of the way of conflicting Federal law.”[ii] The first step back provision per U.C.C. § 9-109 states that Article 9 does not apply to “a security interest subject to any statute of the United States, to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of property.”[iii]
This paper concludes that the U.S. Copyright Act is governed by Federal statutes that supersede U.C.C. revised Article 9, with respect to secured interests in registered copyrights.[iv] The Patent Act and the Lanham Act (i.e., the Trademark Act) do not comprehensively provide for the filing of security interests, and therefore do not require comparable U.C.C. “stepback.”[v]
This paper addresses several topics: (1) Intellectual property assets (e.g., patents, trademarks and copyrights) are growing at a rapid rate in the U.S.[vi] (2) Intellectual property assets, i.e., general intangible assets, have replaced tangible assets as the largest percentage of company assets overall in the U.S.[vii] (3) At a time when intellectual property assets are continuing to grow in importance, it is more difficult to obtain a secured interest in intangible assets than it is to obtain a secured interest in tangible assets.[viii] (4) The ongoing tension between the U.C.C Revised Article 9 and Federal Intellectual property laws and why that causes difficulty in creating secured transactions.[ix] (5) If the inequity between secured interests in intangible vs. tangible assets is not corrected the U.S. economy and therefore economic prosperity in the United States will be negatively impacted (i.e., “speed bumps on the road to economic or continued economic prosperity”).[x] (6) There are proposed systems (e.g., ABA proposal) for creating greater confidence in secured transactions supported by intangible assets (i.e., specifically copyrights, patents and trademarks).[xi]
This paper will only address intellectual property involving patents, trademarks and copyrights.[xii] However, there are many other categories of intellectual property, such as trade secrets, for example, that can be used in secured transactions.[xiii]
Many businesses today deal almost exclusively with intellectual property, e.g., Ocean Tomo, LLC[xiv], ANOVA INNOVATIONS, LLC[xv], and the like. Imagine a business that engages exclusively in developing, licensing, acquiring, selling, and reselling of intellectual property or general intangible assets.[xvi] Suppose that the business seeks a loan in order to expand its office, hire additional employees, buy equipment, software and computers, for example, with a loan based solely upon the businesses’ intellectual property.[xvii] Unfortunately, if the business attempts to secure the loan based upon general intangibles the loan process is less likely to be successful than a loan based upon tangible assets or collateral.[xviii] Banks, lenders and accountants, for example, have a difficult time evaluating the “monetary value” of intangible assets because they have much less experience in doing so than they do in valuing hard assets.[xix] Financial institutions often lend money to a borrower if the borrower has sufficient collateral[xx] or hard assets.[xxi] This type of asset based lending is common when backed by tangible assets, such as property, consumer goods, inventory, farm products, equipment, etc., knowing that the loan will either be paid off or covered by liquidating the tangible assets.[xxii] A loan based upon a secured transaction in intangible assets is far less likely to receive approval.[xxiii]
II. GENERAL INTANGIBLES DEFINED
The U.C.C. Article 9 defines general intangibles in the negative, as “any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment properties, letter-of-credit rights, letters of credit, money, and oil, gas or other minerals before extraction.”[i] Intangible assets are non-physical and are more difficult to value than tangible assets. They include patents,[ii] patent licensing,[iii] copyrights,[iv] trademarks,[v] trade secrets,[vi] software,[vii] right of publicity,[viii] goodwill,[ix] and customer lists,[x] as well as others. As mentioned supra, this paper will address only patents, copyrights and trademarks.[i]
III. THE INCREASING SIGNIFICANCE OF INTANGIBLE ASSETS IN THE U.S. AND WORLDWIDE
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