November 7, 2009

Perfecting Security Interests in Intellectual Property Is Not a Perfect Process

By Robert J. Lenihan, II and Allen E. Pittoors

In 1962, Michigan slightly revised, and then adopted, the Uniform Commercial Code (UCC).  The UCC governs commercial transactions.  Article 9 of the UCC generally relates to secured transactions and governs the perfection of security interests in personal property.  Although the UCC does not specifically refer to patents, trademarks, or copyrights, the term “intellectual property” is provided as an example of a general intangible in the Official Comments.[1]

For Michigan, Article 9 [2] designates the Secretary of State as the proper place to file (“central filing”) in order to perfect a security interest in general intangibles, including intellectual property.  Notably, however, nothing can be that simple, and the perfection of a security interest in intellectual property has many considerations, caveats, and confusions.  The UCC is a state creation and, as it must (with a bow to the Supremacy Clause), specifically excludes from its scope any security interest subject to a federal statute regulating the rights of parties with respect to the collateral.  As such, filing requirements under the UCC do not apply if federal law (or another state law . . . with a bow to comity) establishes a different system for filing and perfecting security interests – outside the scope of the UCC.


Patents and Trademarks

The Patent Act (Title 35 of the U.S. Code) and the Lanham Act (Title 15 of the U.S. Code) are the respective federal statutes governing patents and trademarks.[3] Both the Patent Act and the Lanham Act have provisions concerning ownership and assignments.  At least since the introduction of the UCC, however, the courts have generally found that neither the Patent Act nor the Lanham Act preempt UCC recording requirements.[4] Accordingly, perfection of a security interest in Michigan for a patent or trademark is accomplished by filing the appropriate documents with the Secretary of State (usually a form UCC-1).

Although the filing of security interests with the U.S. Patent and Trademark Office (USPTO) is not (currently) mandated, it is still advisable to record the security interest with the USPTO in addition to properly perfecting by filing with the Secretary of State under the UCC.  This is because the Court of Appeals for the Federal Circuit has held that a UCC state filing does not provide any protection against purchasers of patent and trademark rights.  For example, it has been held that a bona fide purchaser having a recorded assignment at the USPTO will defeat a secured lien creditor who did not file any notice at the USPTO.[5] Apparently the Federal Circuit, that bastion of commercial legal insight, has conferred BFP (bona fide purchaser for value without notice of defect) status on the purchaser of a patent or a trademark.  Accordingly, although not “required,” the additional filing at the USPTO will protect the secured lender against future purchasers of the patent or trademark.

The Trap in Perfecting Copyrights

No matter the potential benefits of one’s invention, or the cleverness and success of one’s trade design, patents and federal trademark rights cannot be obtained unless one proceeds through the respective formal application process in the USPTO.  With original works of authorship that are otherwise proper subject matter for copyright protection, however, rights subsist from the moment of the work’s creation. Accordingly, copyrights can exist as “registered” or “unregistered.”  Although there are numerous benefits which flow to those who properly register their copyrights with the U.S. Copyright Office, the truth is that many copyright holders do not register their works until it appears litigation is in the immediate offing.  With certain “ever-changing” works, such as computer code and software, it simply may not be feasible to register every version.  This is problematic in terms of perfected security interests.

Registered copyrights are governed by the Copyright Act (Title 17 of the U.S. Code).  Unlike the Patent Act and the Lanham Act, the Copyright Act does specify a method for recording security interests.[6] As such, courts have rejected the notion that federally registered copyrights are perfected under the UCC.[7] In order to perfect one’s security interest in a registered copyright, one must file the appropriate documents claiming a security interest in the collateral with the United States Copyright Office.

The problem with unregistered copyrights is that the Copyright Office does not have any record of their existence.  In other words, one cannot file a security interest in an unregistered copyright with the Copyright Office.  Thus, a significant question remains as to whether an unregistered copyright can be perfected by filing under the UCC.  Although at least one court has held that an unregistered copyright was properly perfected under the UCC by state central filing, [8] there is no guarantee that all, or any other, courts will follow that holding.  Accordingly, the prudent collateral holder should consider filing under the UCC and, additionally, seeking, or requiring, federal registration by the debtor in the security agreement and/or other loan documents, and then filing the notice of its security interest with the Copyright Office in the then registered copyright to assure perfection.

A suggestion in parting:  If it’s worth doing, it’s worth . . . overdoing.

From our first encounters with the UCC, specifically with the mystic catacombs of its Article 9 and the sanctum sanctorum of the perfection of security interests, we are taught a minimalist’s approach.  We are taught the minimum of what must be done to perfect a security interest in the holy “collateral” — but we are taught no more, as though a belt and suspenders approach, while blessed in litigation or in patent claim drafting, is, somehow, inelegant or low.  In this Article you have learned that under current case law, you must file federally with the Copyright Office to perfect a security interest in a registered copyright and you ought to file federally with the USPTO, to protect your client and yourself, with regard to patents and trademarks.  As you conclude reading this article, please consider the sage advice an experienced bankruptcy attorney once gave us:  “There is no penalty for ‘over-perfecting’ a security interest”[9] — but there can be hell to pay if you under-perfect one.  In other words, forget minimalism and with patents, trademarks, and copyrights, record with both the Michigan Secretary of State and the respective federal office.

Robert J. Lenihan, II is a Principal at Harness, Dickey & Pierce, PLC. Mr. Lenihan has over thirty years of experience in complex Federal and State litigation and dispute resolution. In addition to his experience in intellectual property trial and appellate practice, he has significant experience in general corporate defense, licensing litigation, and product liability defense.  Mr. Lenihan can be reached at (248) 641-1232 or by email at

Allen E. Pittoors is an Associate at Harness, Dickey & Pierce, PLC.  Mr. Pittoors prepares and prosecutes patent applications in the chemical and mechanical arts, prepares patent infringement and freedom to practice opinions, and works on a variety of intellectual property litigation matters.  Mr. Pittoors can be reached at (248) 641-1298 or by email at

[1] For purposes of this article, intellectual property means patents, copyrights, and trademarks.  Trade secrets may be construed as intellectual property but whether they are, and how to perfect a security interest, if one can be obtained in trade secrets, is beyond the scope of this article.

[2] MCLA 440.9101 et. seq.

[3] The Lanham Act governs federally registered marks.  State registered marks and common law marks arise from state law, and there is no question that perfection of those state law-created interests are governed by the UCC.

[4] As to patents, see In re Cybernetic Services, Inc., 252 F.3d 1039 (9th Cir. 2001).  As to trademarks, see In re Roman Cleanser Company, 802 F.2d 207 (6th Cir. 1986).

[5] Rhone-Poulenc Agro, S.A., v. DeKalb Genetics Corp., 284 F.3d 1323, 62 U.S.P.Q.2d 1188 (Fed. Cir. 2002).

[6] See, 17 U.S.C. §§ 101, 205.

[7] In re Peregrine Entertainment, Ltd., 116 B.R. 194 (C.D. Cal. 1990).

[8] In re World Auxiliary Power Co., 303 F.3d 1120 (9th Cir. 2002).

[9] David M. Miller, Esq., shareholder, Erman, Teicher, Miller, Zucker & Freedman, P.C.