Recording Security Interests in Australian Patents and Other IP

If you own a patent, or some other valuable intellectual asset, you might want to use it as security to obtain a loan, or other financial support, for your business.  Conversely, if you have funds that you are thinking of investing in a business that owns relevant IP, you may wish to secure an interest in the IP so that you can take ownership if the investee defaults on its obligations.

These types of arrangements are perfectly legitimate.  Registered intellectual property rights, such as patents, trade marks and registered designs, are like any other property in that they can be used as collateral, mortgaged, and otherwise dealt with as securities.

It is preferable that any such security interests be officially and publicly recorded.  There are a number of reasons for this.  For one thing, if somebody is considering buying or licensing a patent, they ought to be able to find out whether any third party holds an interest in it (in the same way that, when buying a second had car, you need to find out whether it is still under finance).  Furthermore, when something goes wrong, such as the rights-holder declaring bankruptcy, there should be some simple way for a party with an interest in the assets to establish its priority.  This is particularly important in more complex cases, in which a number of investors and creditors may have competing claims.

But how, and where, should you record any interests in Australian patents or other registered IP rights?

The Personal Properties Security Register

In the past, security interests in Australian registered IP rights could be recorded on the registers themselves.  For example, a mortgage over a patent could be recorded on the Register of Patents.  However, the Personal Property Securities Act 2009 established a single national online personal property securities (PPS) Register with electronic registration and search processes, replacing over 40 different registers of security interests in Australia, including the Patents, Trade Marks and Designs registers.

From 30 January 2012, mortgages and other interests newly recorded on the Patents, Trade Marks and Designs Registers have had no legal effect.  Furthermore, interests recorded on the IP registers prior to this date have not been automatically transferred to the PPS Register.  A 24 month transitional period was provided for secured parties with interests already recorded on the IP registers to record those interests on the PPS Register in order to maintain their priority.  This means that such interests should be recorded on the PPS Register before 31 January 2014.

Recording Interests on the IP Registers

Although they may be of no legal effect, it is still possible – and advisable – for secured parties to record their interests in the IP registers, in addition to the PPS Register.  This is because parties having registered interests will receive notifications of certain events from IP Australia, and to make submissions and/or appear at hearings in relation to matters which may effect those interests.

For example, if a patentee applies to record an assignment of a patent then IP Australia will record the change of ownership so long as all the paperwork appears to be in order, and there is no information available to indicate that there is any reason why the assignment should not be recorded.  If an interest in the patent is recorded on the Register, then the party holding that interest will be notified and provided with an opportunity to comment, make submissions and/or be heard in relation to whether or not the assignment is legitimate and should be recorded.

Generally speaking, if an interest has not been recorded on the Register of Patents and/or the PPS Register, then the interested party may face difficulties in proving its interest in any court proceedings involving the patent (see, e.g., section 196 of the Patents Act 1990).  Furthermore, there are some types of interest, such as a licence, which can be recorded on the Register of Patents, but which are not security interests and therefore cannot be recorded on the PPS Register.

Conclusion – Record Your Interests!

So, to sum up:

1. if you acquire a security interest in a patent or other form of registered IP, then you should record that interest on both the relevant IP register and the PPS Register;
2. if you acquire an interest that is not a security interest, such as a licence, then you would be well-advised to record that interest on the Register of Patents, or other relevant IP register; and
3. if you have an existing security interest which has been recorded on the Register of Patents, or other IP register, since before 30 January 2012, then you should make sure that the interest has also been recorded on the PPS Register.

Information about the PPS Register can be found on the PPSR web site.

Information about managing registered IP rights is available from IP Australia.  For example, this web page provides information about managing and amending registered patent details, including recording of mortgages, licences, and so forth.

If you are unsure about whether in interest in an IP right is a PPS interest, and/or whether it should be recorded on one or more of the available registers, it is best to seek professional advice.

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Before You Go…

Thank you for reading this article to the end – I hope you enjoyed it, and found it useful.  Almost every article I post here takes a few hours of my time to research and write, and I have never felt the need to ask for anything in return.

But now – for the first, and perhaps only, time – I am asking for a favour.  If you are a patent attorney, examiner, or other professional who is experienced in reading and interpreting patent claims, I could really use your help with my PhD research.  My project involves applying artificial intelligence to analyse patent claim scope systematically, with the goal of better understanding how different legal and regulatory choices influence the boundaries of patent protection.  But I need data to train my models, and that is where you can potentially assist me.  If every qualified person who reads this request could spare just a couple of hours over the next few weeks, I could gather all the data I need.

The task itself is straightforward and web-based – I am asking participants to compare pairs of patent claims and evaluate their relative scope, using an online application that I have designed and implemented over the past few months.  No special knowledge is required beyond the ability to read and understand patent claims in technical fields with which you are familiar.  You might even find it to be fun!

There is more information on the project website, at claimscopeproject.net.  In particular, you can read:

1. a detailed description of the study, its goals and benefits; and
2. instructions for the use of the online claim comparison application.

Thank you for considering this request!

Mark Summerfield

Tags: Australia, Licensing, Security interests