Personal Properties Securities Reform
Personal Properties Securities Reform reform includes both registered IP (patents, trade marks, designs and plant breeder’s rights) and IP not capable of registration (copyright and circuit layouts). However, in what appears to be a legislative oversight, transactions involving physical assets that incorporate IP, for example equipment containing embedded software, machinery covered by patents, or patented pharmaceuticals, will need further attention under PPS reform.
In a practical sense, intangible assets such as patents, trade marks, designs and plant breeders’ rights will be described on the PPS Register by a serial number and therefore searchable under that number. For assets such as copyright which is not registered and allocated a serial number, it is assumed that there will be a written description and it remains to be seen how easy it will be to search for this property.
An IP security interest (SI) can continue to be recorded under relevant IP legislation, for example, registering an interest on the Trade Mark Register after the go-live time, however, recordal of an interest on the IP register that is a PPS SI will have no effect on the rights of the registered owner when determining attachment, enforceability or perfection. Moreover, although the Trade Marks Act, Patents Act and Designs Act provide that equities in relation to the relevant IP may be enforced against the registered owner, these provisions will not apply to the equities that are PPS security interests. Priority conflicts between IP registers and the PPS Register will thus be avoided.
While an IP licence is not a SI for which one can register a financing statement, an entity can grant a security interest in an IP licence, and if the IP is sold with the licence still in place, the SI will continue to bind the new owner. Consequently, careful attention is needed when using an IP licence as collateral.
Contrast IP licences with an assignment of IP, which if in substance secures payment or performance of an obligation, automatically creates a SI and a requirement to record on the PPS register.
It is important to understand the PPS reform and its commercial implications. Companies should be thinking about any security interests they have in any IP and the attendant obligations.