Part 1 Security Interests in Personal Property: The PPSA ...
Challenges Related to Security Interests over IP Rights under the Canadian PPSA Norman Siebrasse System Professor of Law University of New Brunswick, Canada PPSA PRINCIPLES Basic PPSA Principles
Modelled on UCC Art 9 Proximates Art 9 Reform complete in early 90s Scope Very broad, subject to specific exclusion (eg land) IP licences problematic due to SCC decision
Test is whether right is analogous to something that was similar to property at common law Legislative reform in Sask includes IP licences Basic PPSA Principles Substance over form Locus of title is irrelevant for secured transactions law and insolvency law All traditional forms are effective and
equivalent chattel mortgage, conditional sale, fixed charge, floating charge, pledge, trust indenture, trust receipt Grant of security interest also effective and equivalent Basic PPSA Principles
Substance over form Locus of title remains relevant for other purposes Locus of title may be relevant for IP law
Financing lease treated as lease for tax purposes As described by Dr Tosato Solution: use security interest That form is irrelevant to PPSA allows flexibility for other purposes Basic PPSA Principles
Publicity (perfection) by registration in PPR Notice filing Agreement itself is not registered Single registration may perfect multiple agreements
Registration of Debtor name Secured party name Asset description Asset Description General asset description by item or kind or by reference to one or more of the following: goods, document of title, chattel paper, investment property, instrument, money or intangible,
After-acquired property clauses are effective & common All present and after-acquired property = GSA Asset Description Serial number for serial numbered goods Motor vehicles Some IP could be treated as serial numbered goods
Patents Registered trademarks General collateral description and serial number are separate fields Search Search by Debtor name
Serial number Cannot search by General collateral description Secured party name (General collateral description and serial number
are separate fields) Registration and search are entirely online Basic PPSA Principles First-to-file priority Knowledge generally irrelevant Super-priority for purchase-money security interest (PMSI)
Eg Conditional sales agreement Grant of IP licence during term of agreement with assignment on satisfaction of obligations creates PMSI CURRENT CANADIAN SITUATION Current Canadian Situation
Commercial law generally is provincial responsibility PPSA in effect in all common law provinces Very successful Bankruptcy and insolvency is federal (BIA) BIA well-integrated with PPSA No priority reversals Current Canadian Situation IP is generally federal
Except unregistered trademarks, trade secrets IP Acts have registration system Ownership interests are registrable CIPO permits registration of security interests Priority
effect of registration is unclear Both wrt security interest and assignments, licences etc Current Canadian Situation Interaction between PPSA / IP Acts not clear Registration in provincial PPR effective to perfect security interest in IP
Law Reform History Law Commission initiative 2002 Post PPSA reforms Roform stalled Institutional disinterest from CIPO Dual registration solution
Now: Patent troll problem of rights of IP licensees in insolvency Nortel Challenges Legal challenges Priority & registration Substantive law
Institutional challenges LEGAL CHALLENGES Priority & Registration How to integrate PPSA security interests registry with IP title registry? Patent, copyright, registered trademarks Issue is not primarily federalism
IPRs not subject to title registry treated as general intangibles under PPSA Eg unregistered trademarks IP Title Registry Reform Problem (1)
Current Canadian IP title registries not adequate for commercial purposes Substantive effect of registration Searchability Need definitive asset searchable registry Search & Registration
Problem (2) Dual search / registration PPR for security interests, IP registry for title Goal Minimize combined search & registration burden Search & Registration
Perfection with single registration minimizes registration burden while increasing search burden and vice versa Entirely eliminating dual search /registration is not possible All Assets v Single Asset Tension between party dealing with
Single IP asset and All assets of the debtor All-asset financing facilitated by debtor name registration IP-specific financing facilitated by asset registration Two Approaches
Security interests must be registered in PPR Priority Rule Assignments & security interests have priority according to order of registration in respective registries Advantages Uses existing sophisticated PPSA (in Canada) General financier can perfect
security interest with single registration Disadvantages Chain of title problem Consider party dealing with specific IP (eg prospective assignee) Must search IP registry for prior owners and PPR by prior owner name for security interests granted by predecessors in title Requires
uniform debtor name rules Disadvantages Difficult IP registry reform required Debtor name rules consistent with PPR rules required How to enforce name rules? Invalidity of assignment is draconian
Disadvantages Foreign debtor problem Twist on chain of title problem Which PPR? Location of Debtor for general intangibles Foreign debtor granting security
interests in UK IPRs registers in foreign PPR Disadvantages Characterization problem Exclusive licence to IP with option to purchase at end of term True licence or financing licence? Mischaracterization results in
invalid registration Solved by dual registration IP REGISTRY FOCUS IP Registry Focus Allow registration of security interests in respective IP Registry Advantages
Solves most of the problems with PPR focused approach Chain of title search not required Asset-based registration, so strict debtor name rules not required No foreign debtor problem Characterization problem does not arise
Disadvantages Burdensome for general financier Requires multiple registration Cant perfect after-acquired IP Solution PPR registration should be effective against insolvency administrator And against any party not registered in
IP Registry Issues Unregistered trademarks Unregistered copyright
General intangibles under PPR Mixed system Royalties Should security interest in royalties be registered in PPR (general intangible) or in corresponding IP Registry? Depends on financing practice Substantive Law
Ordinary course rule Exhaustion UNCITRAL OCR for secured financing law Subject to restrictions in title documents INSTITUTIONAL CHALLENGES
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