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Use the PPSA to protect your IP, even if it's licensed to someone else
Intellectual Property Law News | August 2014
As an important part of the asset base of many businesses, it is vital to protect your intellectual property (IP), whether you are its author or the holder of a licence to use it.
If you are the owner or author of IP and you lose "possession" of that IP by granting licence to use that IP, then you may consider obtaining a "security interest" (like "mortgage") over that IP until the Licence expires.
The relevant legislation is the Personal Property Securities Act 2009 (Cth) ("PPSA") to protect your interest in the IP. The PPSA has been in operation in Australia since 30 January 2012.
A key feature of the PPSA is the Personal Property Securities Register ("the PPSR"), which provides a simple and inexpensive approach to the registration of a security interest. IP is a class of "Collateral" in which a security interest may be created and registered on the PPSR. For a security interest to be enforceable, it must be registered on the PPSR.
Scope of the PPSA
The PPSA affects IP owners, licensees and their financiers where a security interest has been granted over:
- Registered IP (such as patents and registered designs and trademarks);
- Unregistered IP (such as copyright);
- Intellectual property licences;
- Goods that have an IP component, (such as trademarks for brand names), where the security will extend to that IP; and
- Royalty streams.
Section 105 of the PPSA applies to IP (including exercisable rights under an IP licence), in relation to goods, in the same way as it applies to the goods, if:
a) the exercise by a secured party of rights in relation to the goods arising under a security agreement necessarily involves an exercise of the IP rights; and
b) the payment or obligation secured by the security interest is secured by a security interest attached to the IP.
Registration on the PPSR
The first step to secure your interest is to have a written security interest agreement referring to your IP. This can be included in your Licence Agreement.
The second step is to register that security interest on the PPSR.
If a security interest is not registered on the PPSR, there are certain situations where an interest can be lost. Where a party holds an asset in which you may own a security interest and that party becomes insolvent, it is possible for you to lose the asset without compensation for the loss.
As an example, you may sell an artwork on a retention of title basis. If your interest is not registered on the PPSR and the other party becomes insolvent before you have been paid, you might lose the artwork without any compensation. Alternatively, where an artwork is stored in a gallery for sale at a later time and your interest is registered on the PPSR, a liquidator will put you on notice that your interest exists and that it will be given the highest priority.
Security interests
Section 12(1) of the PPSA provides that a security interest is an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (the Licence Fee).
An owner of IP that is the subject of an IP licence (such as a trade mark, patent or design) you can limit the registration of competing security interests. A breach of this obligation under an IP licence could be grounds for termination.
Failure to register
Priority of a security interest can be adversely affected where the interest has not been registered correctly or has not been registered at all.
An IP Licence itself cannot be registered as a security interest, it is the IP that is the subject of the Licence that is able to have a security interest registered over it.
If you would like to discuss your options for protection of your intellectual property through registration with IP Australia and on the PPSR, please contact us at Forum Law on (02) 9560 3388. We can also assist with any other concerns that you may have in relation to your business, conveyancing issues, wills and estates.
