by Scott J. Lebson1
A. Application of Article 9
B. Components of a Security Interest
A. Federal v. State Law
A. Security Agreement
A. Public Notice
A. Where to Perfect
B. How to Perfect
A. Limitations upon Assignment and Relevance to Perfection
B. U.C.C. Filing Required
C. Dual Filings Recommended
D. Intent-to-Use Applications
A. Federally Registered Copyrights
B. Unregistered Copyrights
A. Local Requirements
B. Madrid Agreement and Protocol
Intellectual property assets are particularly valuable because they enable companies to create and hold monopoly power on unique products and services. Key intellectual property rights can provide owners with significant business advantages by allowing, for example, the creation of specialized goods that are capable of generating high profit margins. This situation contrasts with competitors that can produce only standardized products selling at much lower margins. In fact, the driving force behind a majority of mergers and acquisitions completed during the past decade has been the acquirer’s desire to obtain the target’s intellectual property assets. However, the full financial potential of intellectual property cannot be realized unless it can be readily used as a source of funding to facilitate other commercial transactions. Lenders and other professionals in the investment community have come to recognize that a company’s intellectual property is its most valuable asset. Secured transactions are a preferred method in which the true value of intellectual property rights can be realized. This paper will discuss the creation, perfection and enforcement of security interests in the United States and touch briefly upon certain aspects of security interests in intellectual property abroad.
While the law with respect to the creation of security interests is fairly uniform across the 50 states of the United States under the Uniform Commercial Code (U.C.C.), the law surrounding the perfection of security interests in intellectual property remains quite unsettled.2 Companies who offer their intellectual property as collateral, and, in particular, lenders and other secured parties and their counsel, should be wary of the potential pitfalls which currently exist in the intellectual property securitization process.
II. The Uniform Commercial Code (U.C.C.) – ARTICLE 9
A. Application of Article 9.
Although intellectual property rights, in particular, patents, trademarks and copyrights, are often viewed as creatures of federal law, especially those used in interstate commerce, the creation (as opposed to perfection) of a security interest in intellectual property is governed by state law. Article 9 of the U.C.C. explicitly provides that it applies to any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract.4 Section 9-109(a)(1) provides:
Except as otherwise provided in Subsection (c) and (d), this Article applies to:
(1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract…
More specifically, Article 9 of the U.C.C. governs security interests in “general intangibles”5 and general intangibles are considered personal property for purposes of U.C.C. interpretation. Section 9-102(42) of the U.C.C. defines “general intangibles” as “any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter of credit rights, money and oil, gas, or other minerals before extraction. The terms include payment intangibles and software.”6
While reference to patents, trademarks and copyrights are not mentioned specifically in Section 9-102, the Official Comment uses the catch-all term “intellectual property” as an example of a general intangible7 and it is well-settled that patents, trademarks and copyrights fall within the definition of intellectual property.
B. Components of a Security Interest:
While it may seem initially that Article 9 would be the sole body of law that governs the securitization of intellectual property rights, there are three different components in the securitization process. These three components are:
2. perfection; and
Difficulties stemming from preemption by federal law are encountered when secured parties are seeking to perfect their liens so as to obtain priority and make certain their rights are protected and enforceable if foreclosure is subsequently necessary.
III. The Problem of Preemption
A. Federal v. State Law:
Section 9-109(c)(1) of the U.C.C. states:
This article does not apply to the extent that:
(1) a statute, regulation or treaty of the United States preempts this article.8
For intellectual property rights which are governed exclusively by state law, such as common law trademarks used in intra-state commerce and trade secrets, Article 9 is clear that no federal rules need to be followed or federal filings made. The creation, perfection and enforcement of intellectual property security interests in these common law properties are governed by state law. The issue becomes less clear when discussing perfection of intellectual property rights governed by federal law, such as patents, copyrights and trademarks that are used in interstate commerce. However, with respect to the creation of a security interest only, unless and until such time as there is a federal statute governing the creation of security interests in intellectual property, the choice of state law designated by a security agreement will determine whether a security interest has been properly created.9
IV. Creation of a Security Interest
A. Security Agreement:
Section 9-201 (a) of the U.C.C. provides:
Except as otherwise provided in this chapter, a security agreement is effective according to its terms between the parties, against purchasers of the collateral and against creditors.
Although the U.C.C. provides that it will respect the terms of the security agreement, Article 9 sets forth certain basic requirements that must be met in order to create a valid security interest. Article 9-203 states that:
A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.10
The term “attachment” generally means “enforceable against the debtor”.11 In order to be “enforceable against the debtor”, Article 9 sets forth three basic requirements for creating an enforceable security interest in collateral. Article 9-203(b) states:
Except as otherwise provided….a security interest is enforceable only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and
(3)(A) the debtor has authenticated a security agreement that provides a description of the collateral…
A description of personal or real property is considered sufficient, whether or not it is specific, if it reasonably identifies what is described.12 When all three elements above exist, that is: value, debtor’s rights in the collateral and a signed agreement with an evidentiary requirement (the “description”), a valid security interest has been created between the parties and attaches to the collateral.13
V. Perfection of a Security Interest
A. Public Notice:
After the creation of a security interest, perfection is of critical importance in that a secured party with a perfected security interest has greater rights than those of an unperfected secured or unsecured party.14 This is especially true in the event of bankruptcy. To “perfect” a security interest, the secured party must provide public notice of the existence of such interest by filing a lien notice with the applicable local, state or federal agency. The applicable jurisdiction and law depends upon the type of intellectual property involved.
VI. Perfection under the U.C.C.
In order to properly perfect a security interest under the U.C.C., a secured party must first determine:
1) where to perfect; and
2) how to perfect.
A. Where to Perfect:
The general rule under the U.C.C. discussing where security interests should be perfected is stated in Section 9-301, which provides:
Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or non-perfection and the priority of a security interest in collateral.15
Filing under the law of the debtor’s location is the general rule governing the perfection of security interests in both tangible and intangible collateral.16 This, of course, includes security interests against intellectual property. If the debtor has more than one “place of business”17, its location for purposes of perfection shall be considered its chief executive office.18 If the debtor’s location changes, the security interest is considered perfected for a period of four months, after which a new financing statement must be filed in the debtor’s new location.19 The filing generally takes place in either the Secretary of State’s Office where the debtor is located or in the county clerk’s office.20 It is recommended that dual filing at the state and local levels be made.
B. How to Perfect:
With respect to general intangibles, perfection cannot take place automatically, such as in the case of a purchase money security interest or by simply handing over possession. Rather, in order to perfect a security interest in general intangibles, this must take place by filing what is known as a “financing statement.”21 The financing statement must adequately describe the collateral which is the subject of a lien.22 If only certain intellectual property is serving as collateral, then that collateral must be separately identified.23 If, however, all general intangibles are to serve as collateral, there is no requirement under the U.C.C. that they be separately identified.24 Language to the effect of “all general intangibles now owned or hereinafter acquired by the debtor” is considered a sufficient statement.25
However, in the case of In re 199Z, Inc., a California bankruptcy court held that where the description of collateral merely referred to “general intangibles”, such description was wholly insufficient and the security interest was not properly perfected.26 Unfortunately, for the defendant/creditor in this case, their attempt to perfect with the USPTO was also deemed insufficient and they were relegated to unsecured creditor status.27
As will be discussed in more detail herein, there are certain exceptions to perfection by filing under the U.C.C. The most notable exception regarding intellectual property is found in U.C.C. 9-310(b)(3) and 9-311(a)(1), which provide:
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 interest’s obtaining priority over the rights of a lien creditor with respect to the property preempt Section 9-310(a).
This subsection exempts from the filing provisions of Article 9 those instances where a system of federal filing has been established under federal law. This subsection makes clear that when such a system exists, perfection of a relevant security interest can be achieved only through compliance with that federal system, i.e., filing under Article 9 is not a permissible alternative.28
VII. Perfection of Security Interests in Trademarks
A. Limitations upon Assignment and Relevance to Perfection:
In order to consider how a security interest in a trademark is perfected, it is first necessary to discuss certain limitations upon trademark transfers, which have a secondary effect upon the creation of a security interest. Unlike most assets, including patents and copyrights, special statutory restrictions exist on the form that a transfer of a trademark may take.29 Section 1060 of the Lanham Act provides that:
A registered mark or a mark for which an application to register has been filed shall be assignable with the good will of the business in which the mark is used, or with that part of the good will of the business connected with the use of and symbolized by the mark.30
Trademarks function to identify and distinguish the owner’s goods from those of others and to indicate the source of those goods.31 As such, they cannot exist separate and apart from the ongoing business with which they have become associated.32 If a mark were separated from that business, it could no longer function to identify the source of the goods to which it was attached. It would therefore cease to be a trademark.33 The situation sought to be avoided is customer deception resulting from abrupt and radical changes in the nature and quality of the goods or services after assignment of the mark.34
Merely taking a security interest will not in and of itself violate the rule against an assignment “in-gross”, or without goodwill, inasmuch as a security interest is not an assignment.35 If, however, the debtor defaults and the creditor tries to take title to the mark pursuant to the security agreement, the prohibition against assignments “in-gross” may be triggered.36 Therefore, taking a security interest in a trademark without the associated goodwill could result in the trademark being voided upon foreclosure if the subsequent assignment also takes place without goodwill.37 In order to avoid this consequence, secured parties are advised to take a lien on other related assets associated with the products marketed under the trademark, such as accounts receivable, to make certain that in the event of foreclosure, the mere act of assignment would not in and of itself destroy the value of the collateral.38 The secured party need only acquire those assets necessary to ensure that a mark will continue to be connected with substantially the same products with which it has become associated.39
B. U.C.C. Filing Required:
The law with respect to perfection of security interests in trademarks is not settled. Perfection of a security interest in a trademark can be accomplished under Article 9 as a general intangible. Although the U.C.C. provides that any federal filing scheme would preempt its provisions, unlike Section 205 of the Copyright Act discussed later herein, Section 1060 of the Lanham Act currently only addresses the issue of assignment of trademarks, not liens on federally registered marks.40 There is no specific mention or reference to mortgages, hypothecation, collateralization or any other synonym associated with taking a security interest. In In re 199Z Inc., the defendant/creditor argued that its security interest could not be voided because it had perfected its security interest at the state level under the U.C.C. and at the federal level at the USPTO.41 The bankruptcy court held that an assignment of a trademark is an absolute transfer of the entire right, title and interest to the trademark and the grant of a security interest is not such a transfer.42 It is merely what the term suggests, namely, a device to secure indebtedness. It is a mere agreement to assign in the event of default by the debtor. Since a security interest in a trademark is not equivalent to an assignment, the filing of a security interest is not covered by the Lanham Act.43 Much to the dismay of the defendant/creditor, the court also held that its security interest was not properly perfected under the U.C.C. due to an insufficient description of collateral.44
Furthermore, in Trimarchi v. Together Development Corp., a Massachusetts bankruptcy court rejected the notion that the Lanham Act created an exemption to state and local filing requirements under the Supremacy Clause45 and did not preempt the U.C.C.’s filing requirements to perfect a security interest.46 Additionally, the filing of a security interest was not the equivalent of an assignment and the Lanham Act makes no specific mention of security interests in its recording statute.47 It has been repeatedly held that for federal law to supersede the U.C.C., the federal statute itself must provide a method for perfecting the security interest.48
C. Dual Filings Recommended:
Without an express federal statute, the case law to date would suggest that the proper method of perfection of a security interest in federally registered trademarks is governed by the U.C.C. Interestingly, however, the United States Patent and Trademark Office (“USPTO”) will accept and record security interests in trademarks. Thus, it has become common knowledge and common practice for secured parties to file and record such security interests with the USPTO. This, in turn, has led to the common misconception that recording with the USPTO will be sufficient. This misconception has caused confusion among secured parties who believe that they have taken the appropriate measures to properly protect their interests. Several courts have noted the dichotomy in how this area of the law has developed, which has been referred to by one judge as a “trap for the unwary”.49
Notwithstanding the foregoing, even though filing with the USPTO will have no legal effect in and of itself, it is still advisable to make such a filing. While filing with the USPTO will not perfect the lien, the filing will serve as notice to a subsequent purchaser, who in the course of due diligence, would be well advised to search the USPTO records for security interest recordals. Any purchaser who has notice of an unperfected lien would take the property subject to such lien.50 Accordingly, a defect in perfection under the U.C.C. may still allow the creditor to later enforce its lien against a subsequent purchaser.
D. Intent-to-Use Applications:
In the context of use-based trademarks, a trademark owner acquires common law rights in a trademark before it is entitled to registration of that mark under federal law. However, with the introduction of the “intent-to-use” (ITU) application, a trademark owner may acquire “inchoate” federal trademark rights before acquiring common law rights through actual use.51 Under the Article 9 concept of “rights in the collateral”, the secured party could claim an attached interest in the debtor’s rights in the mark protected under an ITU application before the mark gives rise to any rights under common law.52 However, Section 10 of the Lanham Act provides that no ITU application shall be assignable prior to the filing of an amendment to allege use or a verified statement of use unless the assignee succeeds to all or part of the assignor’s business.53
In Clorox v. Chemical Bank, the Trademark Trial and Appeal Board held that an outright pre-use assignment of an ITU application to a lender as part of a security agreement was prohibited.54 The Board subsequently invalidated the debtor’s trademark.55 However, the Board observed that the grant of a mere Article 9 security interest in a mark would not be considered an assignment and would not provoke a penalty for trademark trafficking.56 This would suggest that ITU applications can properly be taken as collateral, properly attached under Article 9 and presumably, made safe against the strong-arm powers of a bankruptcy trustee.57 Whether an ITU mark can be assigned to a creditor will depend upon whether commercial use has actually been made.
VIII. Perfection of Security Interests in Patents
Although not specifically provided for in the Patent Act, liens on patents historically have been perfected by filing with the USPTO. Section 261 of the Patent Act provides:
Subject to the provisions of this title, patents shall have the attributes of personal property. Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing.58
Similar to the Lanham Act, the patent assignment provision does not specifically address the issue of perfection of security interests in patents. The practice of filing with the USPTO stems from the Supreme Court case of Waterman v. McKenzie.59 The Court in Waterman held that a recorded lien on a patent was tantamount to a delivery of possession, thereby permitting the secured party to sue for infringement.60 The Court opined that:
A patent right is incorporeal property, not susceptible of actual delivery or possession; and the recording of a mortgage thereof in the Patent Office, is equivalent to a delivery of possession, and makes the title of the mortgagee complete towards all other persons, as well as against the mortgagor61
Of course, while Waterman provided that perfection under the USPTO was proper, it could not specifically exclude the U.C.C. method of perfection since the U.C.C. did not exist in the 1890’s. Subsequent to Waterman and with the advent of the U.C.C., there has been a divergence in the lower courts as to whether U.C.C. perfection is proper. Leading this divergence are cases emerging from the bankruptcy courts. In In re Cybernetics, Inc., the Ninth Circuit Court held that state U.C.C. recording requirements are not preempted by Section 261 of the Patent Act concerning assignments in that the Patent Act does not speak specifically to “security interests” and, therefore, recordal at the USPTO is not required in order to properly perfect.62 Therefore, the bankruptcy trustee as a hypothetical lien creditor could not avoid a lien on a patent that had been perfected under the U.C.C., but not with a federal filing.63 In the case of In re Transportation Design, the U.S. Bankruptcy Court for the Southern District of California entertained the question of whether a mere filing of a U.C.C.-1 Financing Statement was sufficient to perfect the security interest in a patent. In finding that the recordal at the USPTO was not required, the Court reasoned that with the advent of the U.C.C., it is no longer necessary to create a security interest by an assignment or transfer of title.64 The issue remains somewhat unsettled to this day, although dual filings under the U.C.C. and at the USPTO are still advisable.
IX. Perfection of Security Interests in Copyrights
A. Federally Registered Copyrights:
Of the three most prominent forms of intellectual property, namely, patents, trademarks and copyrights, only the Copyright Act currently provides for a federal perfection scheme. Section 205 of the Copyright Act provides:
Any transfer of copyright ownership or other document pertaining to a copyright may be recorded in the Copyright Office if the document filed for recordation bears the actual signature of the person who executed it, or if it is accompanied by a sworn or official certification that it is a true copy of the original, signed document.65
At first glance, Section 205 does not appear to discuss securitization of copyrights in any manner whatsoever. However, upon closer scrutiny of the Copyright Act, the definition of a “transfer of copyright ownership” is defined under Section 101 as:
[A]n assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license.66
Case law under this section, including the leading case in this area, In re Peregrine Entertainment, has emphatically rejected any notion that federally registered copyrights are properly perfected under the U.C.C. or that a U.C.C. filing is an acceptable alternative method.67 The Peregrine court opined that even in the absence of express language, federal regulation will preempt state law if it is so pervasive as to indicate that Congress left no room for supplementary state regulation.68 In view of the comprehensive scope of the Copyright Act’s recording provisions, along with the unique federal interests they implicate, the Peregrine court held the view that federal law preempts state law in the context of registered copyrights.
B. Unregistered Copyrights:
Although security interests in registered copyrights can only be properly perfected by recording with United States Copyright Office, it has been held in cases such as In re World Auxiliary Power Co. that a bank’s security interest in unregistered copyrights was properly perfected pursuant to Article 9 of the U.C.C., as no other way existed for a secured creditor to preserve priority in an unregistered copyright.69 In In re World Auxiliary Power, whereby the Ninth Circuit rejected the notion that Peregrine could be extended to unregistered copyrights, the court stated that the effect of such an extension would be to make registration of copyrights a necessary prerequisite of perfecting a security interest.70 The court continued that such a requirement would effectively render unregistered copyrights useless as collateral, which was not the intent of the statute.71 On the other hand, other cases decided subsequent to Peregrine have extended Peregrine’s holdings to include unregistered copyrights as well, finding that only a federal fling with the Copyright Office was the proper method and if registration was required, then this was a necessary prerequisite to perfection.72 In In re AEG Acquisition Corp. and In re Avalon Software, Inc., both courts held that perfection could only be obtained by first registering the copyrights and thereafter recording the security interest with the Copyright Office. A prudent creditor/secured party may want to insist on registration and recordal at the Federal level while simultaneously recording at the U.C.C. level against any unregistered rights.
X. Perfection of security interests in Domain Names:
To date, there have been no statutes, regulations or case law to suggest that the creation and perfection of security interests in domain names cannot be achieved under the U.C.C. under the rules set forth for general intangibles. The filing of a financing statement setting forth a description of the domain names to be used as collateral should ensure proper perfection. However, there is a split in both legal authority and among legal scholars and practitioners as to whether domain names are in fact a type of “property”. Many argue that a domain name is not property and that the registrant of a domain name receives only the conditional contractual right to the exclusive association of the registered domain name for the term of the registrations.73 The registrant does not, through its contract with the registry, obtain any rights against any other person other than the consequent exclusivity resulting from the fact that an identical domain name cannot be used during the term of registration.74 The legal status of domain names has been characterized by analogy to that of telephone numbers.75
On the other hand, The Anticybersquatting Consumer Protection Act (ACPA) authorizes in rem civil action against a domain name, suggesting that a domain name is a form of intangible property, especially since in rem actions are brought specifically against property.76 Cases decided under the ACPA have held that Congress intended for domain names to be treated as property, at least with respect to the ACPA.77 Notwithstanding the split in legal thinking as to whether domain names are considered a form of property, domain names have nonetheless routinely been made subject to security interests created and perfected under the U.C.C.
XI. International Creation and Perfection of Security Interests
A. Local Requirements:
As the value of intellectual property rights are more widely recognized now more than ever before and companies are placing a premium on the protection of these rights, the creation and perfection of security interests in intellectual property are becoming more common. Companies with substantial worldwide intellectual property portfolios are offering not only their domestic intellectual property rights as security to finance a transaction, but increasingly, their international rights as well. Towards that end, secured parties would be well advised to seek perfection of these security interests at the relevant registries in several, if not all, of the jurisdictions in which the intellectual property security interest has been granted. However, not all jurisdictions recognize the creation of security interests in intellectual property and, at the same time, offer a mechanism for perfection of same at the relevant intellectual property registry. Recordal of security interests in intellectual property may need to take place on the local level as well as at the relevant intellectual property registry and local counsel may need to be consulted in this regard.
Subsequent to identifying those jurisdictions which offer a mechanism for perfecting a security interest in intellectual property, it is critical to determine whether the security agreement will be accepted for recordal. While some jurisdictions will accept a standard security agreement, it may be necessary to effect certain amendments to the security agreement in order to create a valid security interest under local law. A common example of this would be changing the “governing law” provisions to that of the jurisdiction under which perfection is sought. In many instances, it may be necessary for the parties to execute several new security agreements tailored specifically for creating and perfecting liens in certain jurisdictions. Local counsel may need to be engaged to determine whether the security agreement will suffice for purposes of creating and perfecting a valid intellectual property security interest under local law.
In order to make certain that the secured party is not blindly undertaking the ministerial act of perfecting the security interest, it may be worthwhile to obtain a formal opinion letter of local counsel discussing some or all of the following points:
(1) whether any prior liens or encumbrances have been recorded against the rights;
(2) whether a valid security interest is created by the security agreement under local law;
(3) whether the security interest is capable of being perfected at the local Patent, Trademark or Copyright Registry; and
(4) subsequent to perfection, whether the security interest is capable of being enforced against third parties.
Simply determining which jurisdictions recognize perfection of security interests and identifying what supplemental documentation would be needed is not enough. A thorough cost-assessment of the value of the rights subject to the security interest may be worthwhile. In the end, it may not be worthwhile to proceed in a jurisdiction where sales or use does not exist. Factors to consider in this determination are:
(1) the number of IP rights subject to the security interest;
(2) the government fees in perfecting the security interest;
(3) local counsel fees in preparing an amended or new security agreement, supplemental documentation, opinion letters and handling the perfection of the security interests;
(4) the value of the rights as determined by notoriety and/or sales in the products;
(5) the sophistication of the jurisprudence in a particular jurisdiction; and
(6) other standard valuation benchmarks in determining the value of intellectual property rights.
In addition to cost considerations, time is also a factor when considering perfection of security interests abroad. While certain jurisdictions can typically record the security interest at the relevant Registry within 3-6 months, there are still many jurisdictions which typically require several years before recordal is officially reflected on the register. Therefore, in terms of obtaining the benefits of perfection by providing notice to third parties, proceeding in some of these jurisdictions may not be worthwhile.
In the event of a default, a secured party should be aware of what steps must be taken in order to enforce the security interest and foreclose on the intellectual property rights. If the defaulting party is unwilling to assign rights back to the secured party, the secured party may need to bring a court action under local commercial law.
B. Madrid Agreement and Protocol:
A registrant who furnishes their International Registration as security may notify the national Trademark Office of the jurisdiction in question to inform WIPO or inform WIPO directly, which will then record the security interest in the WIPO Register. It should be noted, however, that a security interest in a trademark may not be recognized under the laws of some of the national jurisdictions to which an International Registration has been extended, even if WIPO records the security interest effective against all designated jurisdictions.78 As a result, the national laws of the particular jurisdictions to which the International Registration has been extended should be reviewed.79
XII. Future Perfection Schemes and Pending Legislation
In view of the unsettled nature with respect to the perfection of security interests in intellectual property, considerable risk still exists with respect to exploiting the full financial potential of intellectual property. In recognition of this fact, several bills have been proposed in Congress to address this lack of uniformity. Proposals submitted within the last few years include the Intellectual Property Security Interest Coordination Act and the Intellectual Property Security Act. Both bills were very similar in that they recognized the shortcomings in the current system and the unsettled nature of the law in this area. Predictability and uniformity in the treatment of security interests on a federal level would help minimize the risk of loss or impairment of rights and make intellectual property collateral more valuable and useful than before. However, these bills were not passed and parties to commercial transactions should continue to look to the current state of the law for guidance in the financing and securitization of intellectual property.
In today’s rapidly changing global economy, intellectual property has been cast in a new and dynamic role in commercial lending transactions. The legal confusion stemming from preemption results in increased transaction costs and additional risks. Uncertainty with respect to priority of interests in secured transactions can reduce the value of intellectual property and, in some cases, foreclose access by intellectual property owners to much needed capital. Intellectual property owners, lenders and potential purchasers would all benefit from a uniform, dependable method for perfecting and tracking security interests in intellectual property.