IP Tech Knowledgy
Be Smart When Taking Intellectual Property as Collateral
When a lender takes a security interest in intellectual property, documentation should consider different ways IP can exist. Taking a security interest only in IP applications and registrations does not encumber all IP. While patents exist only when registered, both trademark and copyrights can be registered and can also exist even if not registered. Trade secrets are never registered. A detailed listing of IP on a financing schedule should include both registered and unregistered IP. Using the term “General Intangibles” covers it all. Security interest grants in trademarks must also include accompanying goodwill and assets, such as licenses, that support the goodwill. Perfecting the security interests is also tricky, but the best practice is to file with the registry and also utilize UCC filings for all IP other than registered copyrights. Registered copyrights are perfected at the US Copyright Office. Patents are perfected at the US Patent and Trademark Office as against subsequent bona fide purchasers. UCC filings cover anything else, including patents (as against subsequent lienholders), unregistered copyrights, all trademarks, and trade secrets. Domain names should be listed on the UCC filing, but they are likely deemed contract rights, not general intangibles. When a login and password is the only way to “possess” an asset like social media, arrange to gain access upon default. For registered and applied-for copyrights and patents (and trademarks), it is wise to have a borrower affirmatively covenant to file in the appropriate registry fresh documents to perfect new registrations it receives.