E-Business 101, Part 4: Security Interests.com - Security Interests In Other Intangibles
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To perfect a security interest in other general intangibles such as lease agreements, software licenses, royalty agreements, data and data licenses, we turn to Article 9 of the Uniform Commercial Code.
With regard to trade secrets that are protected by the diligence of the owner and not any particular filing, the due diligence of the creditor, should include an inspection of the systems by which the trade secrets are kept secret.
Many e-Businesses update their software, content and artwork regularly. Creditor documents should require a borrower to promptly make all necessary and desirable filings to protect its interests in its intellectual property and update the creditor's interests.
As discussed in the first part in this series, domain names appear to have substantial value. However, the value of the domain name is inextricably linked to whether or not the owner also owns the trademark.
Recent cases have held that domain names and other intellectual property may not be garnished by judgment creditors to secure payment of debts.
Conclusion
Assuming that approximately half of the e-tailers may cease to exist, it follows that approximately half are likely to succeed or at least survive. It will be up to our clients to evaluate and manage their business risk. However, it will be up to their attorneys to help them identify and minimize legal risks.
Attorneys who represent businesses or institutions that extend credit to e-businesses or businesses with an e-commerce component should either familiarize themselves with the methods for obtaining and perfecting security interests in intellectual property, especially as it relates to assets of e-businesses, or find attorneys with that knowledge who can assist in transactions as special counsel
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