Security Interests over Intellectual Property
The Personal Property Securities Act 2009 (PPSA) commenced on 30 January 2012 and established a national Personal Properties Securities Register (PPSR). From a security enforcement and priority perspective, the PPSR is the sole register of record in Australia.
Certain forms of intellectual property are specifically defined to fall within the reach of the PPSA, including rights in Designs, Patents, Trade Marks, Copyright and corresponding foreign intellectual property rights.
Significantly, existing security interests over intellectual property recorded in the registers operated by IP Australia prior to commencement were not automatically migrated to the PPSR. There is a two year transitional period ending on 31 January 2014 for these and other interests that arose prior to 30 January 2012 to be registered on the PPSR so that they do not lose priority.
Security interests in intellectual property arising on or after 30 January 2012 must be registered on the PPSR and this should be done without delay to preserve their priority.
It is still useful for security holders to record such interests on the registers operated by IP Australia to gain additional notification benefits.
A security interest is defined as an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). This includes transactions such as fixed and floating charges, chattel mortgage, conditional sale agreement (including an agreement to sell subject to retention of title), hire purchase agreement, pledge, consignment, lease of goods and an assignment which provides for a reversion of ownership back to the seller in certain circumstances.
Significantly a licence is specifically excluded from the definition of security interest, so there is no need for rights under a licence to be registered on the PPSR. However, a licence of intellectual property rights (and the proceeds of that licence) may form collateral for a security if permitted under the licence agreement. A registered security interest over a licence continues after the underlying intellectual property right is transferred. A security interest may also be separately granted over the goods subject of the licence which, by virtue of the PPSA, can also extend to the underlying intellectual property right. Such arrangements may give rise to competing security interests. It may be better for a licence agreement to specifically prevent each party (or at least the licensee) from creating a security interest over the licence. At the very least, there should be a requirement for a licensee to exclude intellectual property rights from any subsequent security interest created over the goods.
Australian businesses and holders of interests in Australian intellectual property should conduct an audit and review their existing agreements to determine whether there are security interests which need to be registered on the PPSR. Intellectual property owners should regularly monitor to PPSR to verify that only valid security interests are registered.
Further information about the PPSR is available here .
The PPSA is a rather complicated piece of legislation with provisions specifically impacting upon the priority of security interests over intellectual property and professional advice should be obtained.