The Morphing of Property Rules and Liability Rules: An Intellectual Property Optimist Looks at Article 9 and Bankruptcy

Abstract

The thesis of this paper is that the legal regime protecting copyright and trademark is in conflict with the legal regime protecting secured credit arrangements both from the perspective of allocation of property rights and the means in which property rights are protected. The point of this thesis is not to show that intellectual property and secured credit are irreconcilable. Rather the point is to isolate the conflicts and suggest ideas for reform. Although many individuals have written about reforming Article 9 and or Bankruptcy Law from the perspective of the secured creditor or the debtor, this Article is one of the few that addresses the question from the perspective of the goals of intellectual property. From the perspective I have adopted, I have demonstrated that one's attitudes towards Article 9 and Bankruptcy as well as relevant reform proposals, hinge on whether one is an intellectual property optimist or an intellectual property pessimist. An optimist would advocate for stronger protection ofthe rights of the intellectual property owner and less for creditors and licensees. A pessimist would advocate the opposite position, heralding a strong, coherent system for perfecting security interests, for clear rules in determining priority disputes between assignees and secured creditors, and for property protection for licensees against licensors. The current system has much to encourage and much to upset optimists and pessimists alike. Although in this paper I have attempted to address the perspectives of pessimists and optimists equally, in this concluding section I adopt the optimist perspective exclusively in order to assess reform proposals and to suggest how intellectual property law and the law of secured credit can be reconciled. Current reform proposals focus solely on amending the Article 9 filing requirements to conform with federal law. I demonstrate that such proposals will be ineffective and counterproductive without an accompanying change in the treatment of intellectual property under Section 365 of the Bankruptcy Code.

JEL Classification: D23, G33, K13, K39