Security Interests in Bank Account and Intellectual Property

This paper will introduce and discuss the Legislative Guide on Secured Transaction prepared by the UNCITRAL since 2002 (“Guide”) specifically regarding security interests in bank account and intellectual property Although the Guide addresses the matter of security interests in bank account, it does not properly address the matter of security interests in intellectual property assets which are becoming increasingly important as a source of financing. Intellectual property means patents, trademarks, copyrights, etc. while intellectual property rights can be defined rights in patents, trademarks, copyrights, etc. Intellectual property assets may include the interest of the owner, the interest of a transferee, royalties, physical embodiments, infringement claims. As to security right there could be either integrated approach including assignments and licences or non-integrated approach. Security in intellectual property assets may be taken: (i) if a security right is created in all assets of a debtor; (ii) if a security right is created in tangible assets embodying intellectual property rights; or (iii) if a security right is created directly in an intellectual property asset. If the Guide could include intellectual property matters it will provide an opportunity to harmonize and modernize the security interest law relating to intellectual property, since current national laws are not adequate, i.e., there is no law or, if there is, the law is unclear and has gaps or inconsistencies The Guide will further promote intellectual property financing since creators need access to low-cost credit to create and disseminate their work. The Guide will be a medium to combine intellectual property and secured financing law property and transfer of property in intellectual property assets security interests in movable assets. The Guide is a product of a consensus-based legislative committee of the United Nations. Influence of UCC Article 9 can not be denied but is often exaggerated. Novel notions such as relative effectiveness of a security right, registration and control are justified by practical considerations. The Guide will provide certainty and flexibility combined. Potential benefit of certainty (necessary but not sufficient condition) will increase the access to lower-cost credit. Potential benefit of flexibility will result in wider adoption with practical results fitting into national legal systems. Especially, since intellectual property assets are becoming increasingly important as a source of financing, the rules for security interest in intellectual property will help technology focussed small and medium companies.