Consciousness of the importance and value of intellectual property assets continues to grow. Given this increasing focus, those lending to businesses with significant IP assets must ensure any general security they take for this lending covers IP, as well as the more “traditional” assets of the borrower.
Securities over personal property including IP are governed by the Personal Property Securities Act (PPSA). When the PPSA came in there was uncertainty about how this might impact IP rights. A few years on confusion remains. So what are the important things to know?
- IP ownership rights (Patents, Registered Designs, Trade Marks, Copyright, Circuit Layouts and Plant Breeders Rights) and a licensee’s rights under an IP licence are collateral over which a security interest can be granted.
- The grant of an IP licence is not the grant of a security interest.
- If security is taken over collateral including IP, it is generally in the secured party’s interest to register that security interest on the PPS Register.
- When registering a security interest over IP collateral as “commercial property” (as defined in the PPSA) a serial number may be used. The serial numbers to use are:
|Patents||The IP Australia patent number; or If it does not have a patent number — the IP Australia patent application number; or If it does not have an IP Australia patent number or a patent application number — a PCT number (ie an international application number, or if unavailable, publication number).|
|Designs||The IP Australia design number; or If it does not have a design number — the IP Australia design application number.|
|Plant Breeders Rights||The IP Australia plant breeder’s right number; or If it does not have a plant breeder’s right number — the IP Australia plant breeder’s right application number.|
|Trade marks||The IP Australia trade mark number; or If it does not have a trade mark number — the IP Australia trade mark application number.|
- As copyright and circuit layouts are not registrable IP in Australia, a serial number cannot be used. Advice should be taken on how to best describe these assets in a PPS registration. A general designation will suffice subject to identification issues at the time of enforcement.
- A buyer of IP who was not a party to a transaction which created or provided for a security interest over the IP will generally take the IP free of that security interest if it could have been, but was not, registered by serial number. In other words, the security interest cannot be enforced with respect to the IP if the third party buyer was not aware of the security agreement and the PPS Registration did not contain the serial number. Accordingly, the secured party should ensure its registration contains the correct serial number.
- If the relevant serial number of IP changes (eg a patent application is filed with IP Australia based on an earlier PCT application), any earlier PPS registration should be amended to include the most current serial number.
- Sections 105 and 106 of the PPSA apply specifically to IP, however, the 2015 review of the Act for the Attorney-General’s Department recommended deletion of these provisions.
- Security interests can still be registered on the various IP registers (eg the Register of Patents). Secured parties should consider registering on both the PPS Register and the relevant IP register. Continuing to register on the relevant IP register ensures the secured party is notified by the IP registrar of critical actions taken with respect to the IP registration (eg an application to record an assignment of ownership of the IP).
Please don’t hesitate to contact us if you have any questions regarding IP and security interests.