Intellectual property (IP) rights have become a highly sought after form of security for financiers in recent years. However, the complexities of competing priority interests registered on different registers made priority disputes an often unnecessarily complex task.

The Personal Property Securities Act 2009 (Cth) (PPSA) brought changes to the way in which security interests over IP were to be registered.

Prior to the introduction of the PPSA all security interests held over IP were registered on the relevant Australian IP register. However, the PPSA amended the various Acts regulating trademarks, patents and designs and in a bid to standardise the rule of priority interests in tangible and intangible property the Australian IP registers were divested of their legally binding power that secured a security holders interest.

While IP ownership is still recorded on the relevant IP Register held by a company, registration of security interests over IP is now to be conducted through the PPSR.

Perfection of a security interest granted over IP on the PPSR

Perfection occurs through registration on the PPSR.

Failure to perfect a security interest on the register does not affect the agreement between the parties however it will affect the priority of the security interest in the event of a priority dispute. Further, in the event that the grantor became insolvent, perfection would prevent the interest vesting with the grantor and then being dealt with by the liquidator.

It is necessary to note the way in which registration is to occur.  For IP that is registrable; such as trademarks, patents and designs, it is a requirement of registration that a security interest be registered using the serial number corresponding to the registration of the trademark, patent or design.   If this is not done, the registration will be invalid.  The serial number is generally the registration number provided by IP Australia and the registration will be valid for a period of 7 years.

For unregistered rights such as those under copyright, registration on the PPSR must contain a description of the property that clearly explains which property the security interest is held over.  Failure to clearly describe the property will result in an imperfect registration and loss of priority.

Owners of Intellectual Property

Owners of IP may be at risk of losing their rights over their property. In circumstances where:

1. IP rights are sold on a ‘retention of title’ basis; and
2. the owner (i.e. the seller) fails to register their interest on the PPSR; and
3. a subsequent registration is made, or the purchaser becomes insolvent and an appointment occurs; then

the owner will lose their interest in the IP.

Owners of IP also need to be aware and must ensure that only valid registrations are being made on the PPSR over their IP rights. This can be done by conducting periodic searches of the PPSR to deal with any invalid or out of date registrations are removed.

If an invalid registration has been lodged over your IP rights there are steps that can be taken to remove such registrations.  You should act quickly in the event of discovering a questionable registration.

For further information or assistance with registrations on the PPSR please contact ERA Legal.