A legislative framework for intellectual property financing: Intellectual property as collateral under the UNCITRAL Legislative Guide on Secured Transactions

Abstract

This article introduces the UNCITRAL Legislative Guide on Secured Transactions and its Supplement on Security Rights in Intellectual Property, both of which are intended to provide guidance to States with regard to enacting legislation on secured transaction, in particular, regarding intellectual property. Based on the discussions provided therein, this article points to four elements to be included in the legislative framework for intellectual property financing: 1) that it should be a comprehensive regime for movable assets including intellectual property, 2) that it should be possible to create security rights in future intellectual property, 3) that it should provide priority rules for those financing the acquisition of intellectual property and 4) that it should contain rules on the law applicable to security rights in intellectual property. The article concludes that, while these innovative features once included in the legislative framework for intellectual property financing would foster the use of intellectual property as collateral in secured transactions, it is not enough, acknowledging that valuation of intellectual property is a practical barrier. In this context, this article urges the intellectual property community to develop standards for the assessment intellectual property based on the market mechanism with the understanding that secured transactions was, by nature, a risk-adverse transaction.