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Introduction
Before beginning the substantive discussion of security interests in Intellectual Property, it is important to address
the key concepts broadly applicable to those discussions.
Security Interests v. Assignments
A security interest is a property interest, not outright ownership. This interest can be created by agreement or by
operation of law, and is used to secure the performance of an obligation.
1
The obligation secured is usually the
payment of money. A security interest can be created in any collateral, including the proceeds to which a security
interest attaches. A security interest is effective between the parties, against purchasers of the collateral, and against
creditors.
2

The security agreement, to be enforceable, must sufficiently describe the collateral subject to the security interest,
for evidentiary reasons.
3
A description of collateral sufficiently describes the collateral so long as the identity of the
collateral is objectively determinable, and the description of collateral does not merely state all the debtors
assets or all the debtors personal property.
4

An assignment is the transfer of all right, title, and interest in property, tangible or intangible, held by one party, to
another party.
5
Typically an assignment results in outright ownership, but the transferor can only transfer what rights
they have in the property, which may result in transfers of less than the whole. For instance, a lease may be assigned,
resulting in the assignee holding the lease, not outright ownership. The party transferring their rights is referred to as
the assignor and the party receiving the rights is referred to as the assignee. After transfer, the assignor no longer has
rights to the transferred property, unless otherwise agreed.
Attachment and Perfection
In order to perfect a security interest in collateral, the security interest must first attach to the collateral.
6
Perfection
of a security interest will give the holder of the interest additional rights. Importantly, the right to collect in the event
of a default is enhanced through perfection. Perfection is generally achieved through the filing of a financing
statement with the appropriate government agency, and sometimes by possession, in the case of tangible goods.

A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the
collateral.
7
A security interest is enforceable against the debtor and third parties with respect to the collateral if:
Value has been given; the debtor has rights in the collateral or the power to transfer rights in the collateral to a
secured party; and, the debtor has authenticated (i.e. signed) a security agreement that provides a sufficient
description of the collateral.
8

The Uniform Commercial Code
The Uniform Commercial Code, or UCC, is one of several uniform acts promulgated in an effort to harmonize the
law. The UCC focuses primarily on the sale of goods. The UCC itself is not the law, but merely a proposal of
potential law, which may be adopted, in whole or in part, with or without modification, and codified, by the states,
individually. When appropriate, the UCC details the specific requirements for perfection of security interests,
usually by a filing, in the proper form, with the Secretary of State.

1
UCC 1-201(b)(35), 9-102(a)(73)
2
UCC 9-102(a)(12), 9-201(a)
3
UCC 9-108, 9-203, 9-108 Assem. Comm. cmt 1
4
UCC 9-108
5
http://legal-dictionary.thefreedictionary.com/assignment
6
UCC 9-308(a)
7
UCC 9-203(a)
8
UCC 9203(b), 9102(a)(7)


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When looking to perfect a security interest, it is usually prudent to start by looking to the UCC first. When a
conflicting Federal law exists, the UCC may be preempted, making the filing of security interests by its terms
ineffective to achieve perfection. Preemption of the UCC occurs when there is a Federal law that provides for
perfecting a security interest in a particular way. Preemption derives from the Supremacy Clause of the Constitution,
which states, in relevant part, "[The] [c]onstitution and the laws of the United States...shall be the supreme law of
the land...anything in the constitutions or laws of any State to the contrary notwithstanding."
9

The UCC itself also acknowledges that it may be preempted by conflicting Federal law, stating that the filing of a
financing statement is not necessary to perfect a security interest in property subject to a statute, regulation or treaty
of the United States whose requirements for a security interests obtaining priority over the rights of a lien creditor
with respect to the property preempt the UCC requirements.
10

Security Interests in Intellectual Property
The federal statutes covering trademarks (15 USC), copyrights (17 USC) and patents (35 USC) include provisions
for recording certain interests in intellectual property. The recording systems and the rights protected by proper
recordation under these systems vary substantially.
11

The UCC refers to Intellectual Property generally as general intangibles.
12

Security Interests in Patents
Statutes
Ownership of patent rights, generally, is covered by 35 USC 261. This section provides that a federal recording of
an assignment, grant or conveyance will be enough to give notice to the world, giving the filer priority against
subsequent purchaser[s] or mortgagee[s].
13
Such a filing must be made within a three month period after the
transfer of rights.
13
Although the statutory language is ambiguous enough to cover security interests, security
interests are never explicitly mentioned, and the courts have only partially accepted this interpretation, as will be
discussed further below.
Case Law
The first case to touch on this issue was Holt.
14
In this case, the court determined that a security interests in a patent
was not the equivalent of an assignment, as was alleged by the plaintiff. The court went further to say that, since a
security interest does not pass title to the object of the interest, that section 261 of the patent laws was inapplicable.
Since section 261 was not applicable, this meant that the UCC was not preempted by the federal laws, and was
therefore the proper method to perfect a security interest.
The next court to deal with this issue, in the case of Transportation Design largely agreed with the Holt court, but
made a further distinction between types of subsequent creditors.
15
This court divided creditors into two groups,
subsequent lien creditors, and subsequent purchasers and mortgagees. Ordinarily the UCC would protect against
subsequent claims by both groups, but, according to the court, since the federal patent law explicitly governs the
interest of one of the groups, subsequent purchasers and mortgagees, the patent law preempts the UCC only in
regards to claims by this group.

9
Article VI of the United States Constitution - http://www.law.cornell.edu/constitution/articlevi
10
UCC 9-310(a); 9-310(b)(3); 9-311(a)(1) (2007)
11
http://uscode.house.gov/
12
UCC 9-102 Assem. Comm. cmt 5(d)
13
35 U.S. Code 261 - http://www.law.cornell.edu/uscode/text/35/261
14
Holt v. United States, 73-2 USTC P9680 (DDC 1973)
15
In re Transportation Design & Technology, Inc., 48 B.R. 635 (SD Cal 1985)


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A few years after the Transportation Design decision, the court in City Bank heard a case involving a lien creditor,
and upheld the decision of the Transportation Design court, holding that a federal filing was not necessary, since the
creditor was not a purchaser or mortgagee.
16
The court further stated its reasoning, namely that all filings with the
USPTO were considered absolute assignments, transferring all of the right, title, and interest to the holder, which
would reduce the flexibility of the patent system if required for security interests. This reasoning has been criticized
for making the assumption that all security interests are structured as assignments conditioned on fulfillment of the
underlying obligation. This arguably flawed reasoning stemmed from the courts interpretation of Waterman v.
Mackenzie, which they interpreted to stand for the proposition that conditional assignments a treated as absolute
assignments upon recordation.
17

The next case to address this issue, Chesapeake Fibre, involved a security interest filed exclusively under the UCC,
which was challenged by a purported subsequent purchaser.
18
The court determined that the challenger could not
qualify as a subsequent purchaser, and consequently found the security interest to be valid, confirming the
aforementioned line of cases.
Cybernetic Services, the most recent case to address this issue, held that a filing under the UCC was sufficient to
perfect a security interest against a subsequent lien creditor.
19
Although it did not directly address subsequent
purchasers or mortgagees, the implication was that the prior line of cases was still valid.
Conclusion
The appropriateness of filing under the UCC or federally to perfect a security interest in a patent depends on whether
the entity from who protection is sought is classified as a lien creditor or a purchaser/mortgagee. In some cases, lien
creditors may also be mortgagees however, so this distinction may not be enough to rely upon in all cases. Because
it may be impossible to know who will have a valid claim at a later date against the property that is subject to the
security interest, and it is further difficult, if not impossible, to determine whether they will be classified as a lien
creditor or a purchaser/mortgagee, it is prudent to file for perfection of a security interest in a patent under both the
UCC and Federally. When searching to determine if an interest in a patent exists, it would also be prudent to search
both registries.
Security Interests in Trademarks
Statutes
Title 15 of the US Code, otherwise known as the Lanham Act, provides a framework for recording transfers of
ownership of trademark applications and registrations with the United States Patent and Trademark Office
(USPTO).
20
Specifically, 15 USC 1060 states that "[a]n assignment shall be void against any assignment for
valuable consideration without notice, unless the prescribed information reporting the assignment is recorded in the
Patent and Trademark Office within 3 months after the date of the subsequent purchase or prior to the subsequent
purchase."
21

Although the Lanham Act adequately deals with transfers of ownership, it does not explicitly deal with security
agreements. Despite this, the regulations enacted by the USPTO provide for recording of other agreements affecting
title, in which it has explicitly included security agreements. As a rationale for allowing filing of security interests,
the USPTO has said that it is to "give third parties notification of equitable interests or other matters relevant to the

16
City Bank and Trust Co. v. Otto Fabric, Inc., 83 B.R. 780 (1988)
17
Waterman v. Mackenzie - 138 U.S. 252 (1891)
18
Chesapeake Fiber Packaging Cor. V. Sebro Packaging Corp., 143 B.R. 360 (Bankr. D. Md. 1992), affd, 8 F.3d
817 (4
th
Cir. 1993)
19
In re Cybernetic Services, Inc., 239 B.R. 917 (9
th
Cir. BAP 1999)
20
15 U.S. Code - http://www.bitlaw.com/source/15usc/
21
15 U.S. Code 1060 - http://www.bitlaw.com/source/15usc/1060.html


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ownership of the mark."
22
This statement, in conjunction with federal statute providing that constructive notice
results only from the recordation of assignments, it would seem that the recordation of security interests does not
constitute constructive notice to subsequent purchasers. From this interpretation, it would appear that the federal
trademark laws do not govern the rights of parties holding security interests in trademarks.
Case Law
There are few relevant cases on this subject from which to draw, however those cases are consistent in requiring
only state filing for perfection of security interests. The primary argument in support of this position is that the
Lanham Act, by its own terms, only governs the recordation of assignments. If Congress had intended the Lanham
Act to preempt the UCC, it would have specifically addressed the subject.
This concept was first expressed in TR-3 Industries and Roman Cleanser.
23
Both of these cases addressed whether a
state filing alone was sufficient to perfect a security interest, and found that a state filing was sufficient. Later courts
addressed whether a federal filing alone was insufficient, and determined that it was not.
24

Conclusion
Reasonable minds could differ on the interpretation of the federal statutes concerning the perfection of security
interests in trademarks, and case law is sparse. However, what case law there is has consistently required only state
filing, governed by the UCC, for perfection of security interests. Although UCC filing is legally sufficient, those
holding security interests should consider also filing the security interest with the USPTO. The existence of a
procedure for doing so, although not legally sufficient to provide any enhanced rights alone or in conjunction with a
UCC filing, has caused confusion in this field, and may assist in putting others on notice of your rights.
Security Interests in Copyrights
Statutes
Title 17 of the US code, also known as the Copyright Act, governs copyright generally.
25
Section 205 of this act
governs the recordation of transfers of copyright ownership.
26
This section provides that any transfer of copyright
ownership may be recorded in the Copyright Office. The act defines such a transfer broadly as an "assignment,
mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright."
27
This wording is
considerably broader than that of title 35 of the United States Code or the Lanham Act.
Unlike the comparable sections of the Lanham Act or 35 USC, this statute has typically been interpreted to cover
security agreements, preempting the UCC for perfection purposes. In addition to the typically required filing,
registration of the underlying copyright has also been required to obtain perfection of a security interest, to assure
that other parties have notice, at least constructive, of the interest and the rights of the parties.
Notably distinct from filings under the UCC, section 205(d) typically awards priority to the first executed transfer
over the first recorded transfer.
28
Partially undercutting this distinction however, is the requirement that transfers be

22
Trademark Manual of Examining Procedure 503.02 (2005)
23
In re TR-3 Industries, 41 B.R. 128 (Bankr. C.D. Cal. 1984); In re Roman Cleanser, 225 U.S.P.Q. 140 (Bankr. E.D.
Mich. 1984), aff'd, 802 F.2d 207 (6th Cir. 1986)
24
In re 199Z, Inc., 137 B.R. 778 (Bankr. C.D. Cal. 1992); In re Together Dev. Corp., 227 B.R. 439 (Bank. D. Mass.
1998)
25
17 U.S. Code - http://www.law.cornell.edu/uscode/text/17
26
17 U.S. Code 205 - http://www.law.cornell.edu/uscode/text/17/205
27
17 U.S. Code 101 - http://www.law.cornell.edu/uscode/text/17/101
28
17 U.S. Code 205(d)


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recorded within a month of execution to receive this treatment. If there is no priority contest, a transfer may be
recorded at any time before recordation of a later transfer.
Because the recording system of the Copyright Office provides for the recordation of security interests and sets up a
scheme for priority of such interests, filing with the Copyright Office alone arguably could be sufficient to perfect a
security interest in a copyright.
Case Law
One case to address this issue was Peregrine Entertainment.
29
That court held that federal filing was required to
perfect a security interest, and that filing under the UCC alone was insufficient.
AEG Acquisition added to this body of law that the copyright must also be federally registered to obtain a perfected
security interest in the copyright.
30
Avalon Software later provided additional support for this proposition.
31

Still a later case, World Auxiliary, in reliance on the aforementioned cases, determined that a federal filing system
that was unavailable to those seeking security interests in unregistered copyrights could not preempt the UCC in
cases of filing to perfect a security interest in an unregistered copyright.
32
Therefore, this case stands for the
proposition that a filing under the UCC to perfect a security in an unregistered copyright is valid.
Executive Summary
A security interest in a registered copyright may be perfected by filing with the Copyright Office. A security interest
in an unregistered copyright may be obtained through filing under the UCC.
Summary

As the foregoing discussion illustrates, it is often unclear whether federal or state law, and their corresponding
systems for perfecting security interests, govern the perfection of security interests in trademarks, copyrights, and
patents. Because of this ambiguity, the prudent lender would be well advised to perfect its security interest by filing
under both systems, and, when necessary, to search both systems for prior encumbrances of the pledged collateral.
After the loan secured by the interest has been paid off, the IP owner should insist that a release of the security
interest be filed wherever the security agreement was perfected or recorded.

29
In re Peregrine Entertainment, In re Peregrine Entertainment, Ltd., 116 B.R.194 (C.D. Cal. 1990)
30
In re AEG Acquisition Corp.,127 B.R. 34 (Bankr. C.D. Cal. 1991)
31
In re Avalon Software Inc. (209 BR 517 Bankr. Court, D. Arizona, 1997)
32
In re World Auxiliary Power Co., 303 F.3d 1120 (9th Cir. 2002)