Property that has a borrower as collateral. Your intellectual property (“IP”) rights are assets that can be used as collateral for financing your business through a secured transaction. Historically, borrowers and lenders only used land as collateral. However, the economic base of society shifted, other types of property acquired value, and borrowers and lenders to recognize its worth as collateral.
Today, borrowers can give lenders security interests in intangible assets and tangible assets. Intangible assets include IP rights, such as patents, trademarks, and copyrights, and they are increasingly knowledge-based, and are more likely to be more important.
Valuation of an Intellectual Property Right
It is necessary to determine their value. The valuation of IP rights can be difficult and complicated process. For instance, IP rights frequently have limited life-spans, their value may be increased by other innovations, and they may be worth more than when liquidated. In addition, legal challenges can dramatically alter their value. Due to these difficulties, the valuation of IP is
The Personal Property Security Act
In Ontario, the Personal Property Security Act (PPSA) regulates the use of copyrights, trademarks, and patents as collateral. In order to satisfy the conditions of the Act, the borrower and the lender need to satisfy three conditions.
First, they must sign a Security Agreement (“Agreement”) which contains a clear description of the collateral, and sets out the terms and conditions under which the debt can be recovered. Second, the lender must provide the borrower with “value”, meaning that no security interest will be created until the lender begins to advance financing to the borrower as outlined in the agreement. Finally, the borrower must have rights in the collateral in question. Once these three conditions have been met, “attachment” is said to have occurred.
Registering Security Interests
A lender’s security interest in an IP is not enforceable until a Financing Statement (“Statement”) is filed with the Ontario Ministry of Government Services’ Personal Property Security Registry (PPSR). Once this statement has been filed, the security interest is considered to be “registered”. Registration can last up to 25 years and requires the lender to pay a perpetual or annual registration fees. The lender must send the borrower a Verification Statement within 30 days from the date of registration.
There are a number of rules related to the protection of PPSA, and there can be problems with this process. For example, PPSR is only valid if the attachment is present, and the interpretation of this requirement by the PPSA is currently in a state of transition.
Also providing an inaccurate description of the collateral and providing an inaccurate description of the collateral. This means that the lender might not be able to enforce its security against the borrower’s other creditors. If an error or omission is discovered after a statement, the financial statements are likely to increase the risk of bankruptcy.
Finally, it is important that the right to know the IP right, it is critical that the lenders determine the borrower actually owns the right, and that there is no potential competing interests in the IP. This process is complicated by the fact that the PPSA regulates the creation of security interests in IP, which are federally regulated. Canadian Intellectual Property Office (CIPO) would not reveal provincial PPSR registration.
The Ministry of the Environment and the Ministry of Public Safety, Ontario, and the United States of America.
Discharging Security Interests
The borrower completes its obligations under the terms of the agreement, and it should provide the reader with a written notice of this fact, and ask that the lender to either sign a Financing Change Statement, or provide it with a Certificate of Discharge. If the lender does not comply with the borrower’s request within 10 days, it can face a financial penalty. If no notice is provided by the borrower, the lender has 30 days of the date the borrower completed its obligations to register.
The Value of Intellectual Property Rights
While using intellectual property rights as a complex process, doing so can be very worthwhile. IP rights can afford a borrower substantial value with which to secure a financing. For example, according to Interbrand’s Best Canadian Brands 2010 guide, the Canadian Tire brand was worth approximately $ 1.9 billion, and the Tim Hortons brand was approximately $ 2.6 billion. With the benefit of experienced legal advice it is possible to use
1 Interbrand, “Best Canadian Brands 2010 – The Definitive Guide to Canada’s Most Valuable Brands” (2010) at 20 http://www.interbrand.com/