Security interests over intellectual property

Intellectual property rights represent an increasingly important source of collateral for business financing, yet the legal framework governing security interests in IP remains complex and uncertain. This Article examines the challenges of using intellectual property as collateral and analyzes how different legal systems address these challenges. The Article begins by exploring why IP presents unique difficulties as collateral, including: the intangible nature of IP rights, the territorial limitations of IP protection, the potential for rapid obsolescence, and the interplay between secured transactions law and specialized IP registration systems. Through comparative analysis of approaches in major jurisdictions, the Article reveals significant variations in how legal systems structure security interests in different types of IP. For patents and trademarks, registration requirements and priority rules differ markedly across jurisdictions. For copyrights, which often do not require registration, the creation and perfection of security interests involve additional complexities. The Article examines key practical issues that arise in IP financing transactions, including: how to describe IP collateral adequately in security agreements, where to file or record security interests to achieve perfection, how to determine priority among competing claimants, and what rights secured creditors acquire upon default. It demonstrates that existing legal frameworks often provide inadequate guidance on these critical questions. The Article also analyzes enforcement issues, including the secured creditor's ability to license, sell, or otherwise realize value from IP collateral. It explores tensions between the legitimate interests of secured creditors and the policies underlying IP law, such as preventing inappropriate concentration of IP rights and maintaining the integrity of IP registration systems. The Article concludes with recommendations for reform that would facilitate IP financing while respecting the distinct characteristics and policy objectives of intellectual property law.