Security Over IP – Scots Law Stuck in the 19th Century

I read on the University of Edinburgh Law School Blog that the Scottish Law Commission is going to revisit the law on security over moveable propery, i.e. everything other than land or buildings.

This will include a review of how a lender can take security over a borrower’s Intellectual Property such as patents or copyrights.  By “security” I mean getting some right to the asset where the borrower defaults.

This is a bit of a hobby horse of mine, and I have quite a lot of experience in drafting and enforcing securities over IP.

At present the only cast iron* way for a lender to have security over IP owned by a Scottish Company, i.e. one with its registered office in Scotland, is for the lender to take ownership of the IP (with a promise to return it to the borrower when the loan is paid off).  This is consistent with the Scots law doctrine of “no security without possession”.

English law is more relaxed about security over IP – you can get pretty good security under a English law debenture. 

However, English lawyers should be aware that if the IP is owned by a Scottish Company then the debenture may not offer the required protection.   This is not just theoretical.  I have seen English lawyers fall into this trap a couple of times, and one time it was very costly. 

So if any English lawyers are reading this, and your client is taking security over a Scottish Company with significant IP assets, e.g. a Whisky company that has a lot of registered trade marks, then give me a call.

* For the law geeks out there a floating charge that includes the IP assets does give the lender some protection, but does not protect the lender against the risk of pre-crystallisation alienation of the assets by the borrower.

2 Responses to “Security Over IP – Scots Law Stuck in the 19th Century”

  1. 1 Gavin Ward (WardblawG) July 13, 2010 at 9:45 pm

    I loved that Scots law geek caveat you carved out there Douglas! For info, I have included this Brodies blog’s updates as an RSS feed linked through my site. I hope you are happy for me to do so, but if not please get in touch. Gavin

  1. 1 Rangers and Ticketus – some lessons for English lawyers, outsourcing and commercial contracts « Brodies TechBlog Trackback on March 28, 2012 at 11:51 am

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