General Intangible or Commercial Tort: Moral Rights and State Based Intellectual Property as Collateral Under Ucc Revised Article 9

62 Pages Posted: 21 Jul 2006

See all articles by Lars S. Smith

Lars S. Smith

University of Louisville Brandeis School of Law

Abstract

The article covers issues relating to obtaining and perfecting security interests in certain kinds of intellectual property under Revised U.C.C. Article 9. In particular, the article focuses on how the recent revisions impact the treatment of various forms of intellectual property primarily protected under state law, as well as moral rights. The drafters of Revised Article 9 included a new form of collateral: commercial torts. Previously, torts were excluded as a type of collateral to secure a loan under Article 9. However, when revising Article 9, the drafters decided that certain torts held by businesses, and certain business related torts held by individuals, should be permitted to function as collateral, given the changing nature of the marketplace. However, the use of commercial torts as collateral is limited, both in the method of perfection of such torts, and in the complete prohibition of after acquired property clauses to commercial torts.

The article focuses on whether this change to Article 9 requires a reevaluation of whether certain intellectual property rights are better characterized as commercial torts rather than general intangibles. If so, this will place severe restrictions on the ability of debtors to use those forms of intellectual property as collateral. The article proposes a two part test to determine the proper characterization: First, is the intellectual property right one that exists primarily to vindicate interests of the owner? Second, is the intellectual property right alienable? Using this test, for example, moral rights can never be treated as general intangibles, whereas a trade secret is properly characterized as a general intangible

Keywords: Article 9, UCC, U.C.C., bankruptcy, trade secret, publicity, moral right, secured transaction

JEL Classification: K20, K29, F13, G33

Suggested Citation

Smith, Lars S., General Intangible or Commercial Tort: Moral Rights and State Based Intellectual Property as Collateral Under Ucc Revised Article 9. Emory Bankruptcy Developments Journal, Vol. 22, p. 95, 2005, Available at SSRN: https://ssrn.com/abstract=918104

Lars S. Smith (Contact Author)

University of Louisville Brandeis School of Law ( email )

Wilson W. Wyatt Hall
Louisville, KY 40292
United States
502-852-7273 (Phone)

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