security interest assignment

If you still have questions or prefer to get help directly from an agent, please submit a request. We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

Law, Transactions, & Risk Management
Commercial Law: Contract, Payments, Security Interests, & Bankruptcy

Security Interest in Assignment of Accounts Receivable or Contract Rights - Explained

How Does a Security Interest Attach?

Written by Jason Gordon

Updated at April 6th, 2023

Marketing, Advertising, Sales & PR Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
Accounting, Taxation, and Reporting Managerial & Financial Accounting & Reporting Business Taxation
Professionalism & Career Development
Law, Transactions, & Risk Management Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
Business Management & Operations Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
Economics, Finance, & Analytics Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles

How is a security interest created through the assignment of accounts receivable and contract rights?

Generally, the sale or assignment of rights in accounts, payment intangibles, or promissory notes (account) creates a security interest for the individual to whom the account is assigned. This attaches the security interest to the account. Article 9 requires that an individual file a financing statement to perfect a security interest in an account. There are, however, two exceptions that allow the assignee of the account to perfect a security interest without publicly filing a financing statement.

Please enable JavaScript

Next Article: Perfection of a Security Interest by Possession Back to: SECURED TRANSACTIONS

Single Account to Satisfy a Debt ?

The assignment of a single account in satisfaction of a preexisting debt;

Example : ABC Inc., transfers and account payable to 123 Inc., in satisfaction of a debt that ABC owed to 123. While ABC maintains control over the account payment, 123 has a security interest in the account that is perfected without filing a financing statement.

Automatic Perfection?

The assignor transfers a limited number of accounts to the assignee that does not constitute a significant number of the assignors accounts.

Note : For automatic perfection to apply in this situation, the transferred account cannot constitute a significant percentage of the outstanding accounts of the transferor and the recipient cannot regularly take assignment of accounts in satisfaction of debts.

Discussion Question

How do you feel about the ability of an assignee to perfect a security interest in an intangible account? Why do you think it is important to grant the assignee of an account receivable or contract benefits a security interest? Hint: Think about who is in control of the accounts receivable and contract rights before and after the assignment. Do you agree with the above-referenced exceptions to the requirement to file a financing statement? Why or why not?

Practice Question

ABC Corp sells product at wholesale. It regularly takes payment on accounts for 90 days. These accounts sit in accounts receivable until paid. ABC Corp transfers several of these accounts to 123 Corp but maintains control over the account in order to effectuate collections. What do we need to know about this transfer to determine whether 123 Corp has a perfected security interest in the accounts?

Assignment of security interest clause samples

SECTION 5.04. Assignment of Security Interest. If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account in an amount in excess of $250,000, such Grantor shall promptly assign such security interest to the Collateral Agent for the benefit of the Secured Parties. Such assignment need not be filed of public record unless necessary to continue the first priority and perfected status of the Security Interest of the Collateral Agent against creditors of and transferees from the Account Debtor or other Person granting the security interest.

05/15/2019 (Nxt-ID, Inc.)

Cut contract prep time in half for free

Build document automations that allow you, your staff, and your clients to auto-populate contract templates.

“ I've found it very easy to use. It allows me to work quickly, get something straight from my head and out into the public.”

Partner, Siskind Susser PC

2500 Executive Parkway Suite 300 Lehi, Utah 84043 (866) 638-3627

Level 11, 1 Margaret Street Sydney NSW 2000 Australia +61 2 8310 4319

8th Floor South Reading Bridge House George Street Reading RG1 8LS +44 20 3129 9324

Latin America

Mexico +52 55 5985 3005

Brazil +55 21 4040 4623

How to Successfully Switch Your DMS
DocuSign + NetDocuments
How Ice Miller Adopted the Cloud Completely Remote
Case Studies
Resource Library
Partner Integrations
App Directory
Locate a Partner
Partner Portal
Become a Partner

Terms of Use
Privacy policy
Cookie policy
Privacy policy for california residents

Security Interest Agreement

Jump to section, what is a security interest agreement.

A security interest agreement, also known as a security agreement or pledge agreement, is a legally binding contract that creates a security interest in specific property owned by the debtor to secure the payment of a debt or other obligation. The purpose of a security interest agreement is to provide the creditor with a legal means of enforcing their rights against the property in the event that the debtor fails to repay the debt. A security interest agreement should be carefully drafted and executed in order for it to be effective.

Common Sections in Security Interest Agreements

Below is a list of common sections included in Security Interest Agreements. These sections are linked to the below sample agreement for you to explore.

Security Interest Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.4 5 dex104.htm SECURITY INTEREST AGREEMENT , Viewed April 25, 2022, View Source on SEC .

Who Helps With Security Interest Agreements?

Lawyers with backgrounds working on security interest agreements work with clients to help. Do you need help with a security interest agreement?

Post a project in ContractsCounsel's marketplace to get free bids from lawyers to draft, review, or negotiate security interest agreements. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.

Meet some of our Security Interest Agreement Lawyers

Angela Hayden is an accomplished and driven attorney with a diverse professional background that sets her apart. Having served as a former Assistant Public Defender in Allegheny County, Angela acquired invaluable expertise in navigating the complexities of the criminal justice system. Her trial experience spans a wide range of cases, from minor retail theft to complex criminal homicide, demonstrating her ability to deliver successful outcomes for her clients. Prior to her focus on criminal defense, Angela honed her skills in public policy and political consulting through her work with both the Pennsylvania and United States House of Representatives. This experience provided her with a deep understanding of the intricacies of public policy and the ability to offer strategic guidance to clients. Angela's career also took her to a civil defense firm, where she traveled across the country, defending clients in litigation. This experience enhanced her ability to handle complex civil matters and strengthened her litigation skills. In addition to her expertise in criminal defense and civil litigation, Angela has demonstrated her proficiency in employment law, providing guidance and consultation to small businesses and non-profit organizations. Her keen insight into employment law matters ensures that businesses operate within legal boundaries while fostering a positive work environment. Furthermore, Angela is a licensed realtor, well-versed in residential real estate transactions. This additional knowledge allows her to offer comprehensive legal support to clients involved in real estate matters, ensuring their interests are protected throughout the process. Angela holds a degree from Hampton University and obtained her Juris Doctor from the University of Dayton School of Law. She is pursuing a Master of Business Administration. She is licensed to practice law in Pennsylvania and the District of Columbia, demonstrating her commitment to providing exceptional legal services in multiple jurisdictions. With her extensive experience and passion for achieving favorable outcomes for her clients, Angela Hayden is a dedicated advocate ready to guide you through your legal journey.

Successful entrepreneur and business attorney with keen insight into the challenges faced by small and medium-sized businesses. In addition to my solo practice, I have extensive experience as general counsel for highly regulated businesses where I have negotiated and drafted a wide array of contracts, conducted internal regulatory compliance, engaged in transactional work and assisted with general commercial litigation.

Licensed in MI since 2010. Practiced SSDI appeals and auto negligence for over a decade until 12/2022 when I left largest personal injury firm In MI to open my own estate planning firm. Looking for part-time contract/remote work to supplement income as I build my own practice.

Seasoned corporate, business and real estate attorney with 30 years experience managing private practice groups and in-house legal functions for publicly traded, privately held, and family companies.

I am an experienced family law attorney licensed in California and Florida with over 13 years of experience.

I have worked for over 20 years in the areas of family law, business formation, contracts and real estate law. In the area of family law, I represent clients in all areas of family law including child custody, child support, spousal support and marital property division as well as preparing prenuptial and separation agreements. I am experienced in real estate law, including commercial and residential leases, preparing various types of real estate related contracts. I am also experienced in business formation among other business law matters. I currently work in the area of grant management with the Small Business Administration.

Oliver Keene is not your typical attorney. With a personal touch and a passion for helping others, he goes above and beyond to provide exceptional legal services. Born and raised in the heart of the Appalachian coalfields, Oliver understands the value of hard work and perseverance. His small-town upbringing instilled in him a deep sense of community and a commitment to making a difference in people's lives. Oliver's journey in the legal field began with a Bachelor's degree in Criminal Justice from Bluefield University. He went on to earn his Juris Doctorate from Lincoln Memorial University - Duncan School of Law, where he excelled in his studies and developed a strong foundation in law. Throughout his career, Oliver has gained invaluable experience working as a public defender, an attorney advisor for the Small Business Administration, and in various legal roles. With a focus on estate planning and business law, Oliver is dedicated to helping individuals and families protect their assets, plan for the future, and navigate the complexities of the legal system. His approachable demeanor, attention to detail, and genuine care for his clients set him apart. Oliver's clients can trust that he will go the extra mile to ensure their legal needs are met with the utmost professionalism and personalized service. Outside of his legal practice, Oliver enjoys spending time with his wife and daughter, exploring the great outdoors, and indulging in his passion for hunting and fishing. His commitment to serving military families is evident in his offering of discounted services as a token of gratitude for their sacrifices. When you choose Oliver Keene as your attorney, you're not just hiring a legal professional - you're gaining a trusted advisor and a compassionate advocate. With Oliver by your side, you can have confidence that your legal matters will be handled with the highest level of expertise and care.

Find the best lawyer for your project

How it works.

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Financial lawyers by top cities

Austin Financial Lawyers
Boston Financial Lawyers
Chicago Financial Lawyers
Dallas Financial Lawyers
Denver Financial Lawyers
Houston Financial Lawyers
Los Angeles Financial Lawyers
New York Financial Lawyers
Phoenix Financial Lawyers
San Diego Financial Lawyers
Tampa Financial Lawyers

Security Interest Agreement lawyers by city

Austin Security Interest Agreement Lawyers
Boston Security Interest Agreement Lawyers
Chicago Security Interest Agreement Lawyers
Dallas Security Interest Agreement Lawyers
Denver Security Interest Agreement Lawyers
Houston Security Interest Agreement Lawyers
Los Angeles Security Interest Agreement Lawyers
New York Security Interest Agreement Lawyers
Phoenix Security Interest Agreement Lawyers
San Diego Security Interest Agreement Lawyers
Tampa Security Interest Agreement Lawyers

related contracts

Accredited Investor Questionnaire
Adverse Action Notice
Bridge Loan
Bridge Loan Contract
Collateral Assignment
Commercial Loan
Convertible Bonds
Convertible Note
Convertible Preferred Stock
Cumulative Preferred Stock

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Find lawyers and attorneys by city

The IP Law Blog

How to perfect a security interest in intellectual property (copyrights, trademarks and patents).

When a creditor provides a loan to a debtor, the debtor will often grant to the creditor a security interest in the debtor’s collateral, including the debtor’s intellectual property. A creditor who receives a security interest in the debtor’s intellectual property, usually by a security agreement, must perfect the security interest so that subsequent purchasers and creditors are on notice of the creditor’s security interest in the collateral. Rules relating to the creation, attachment, perfection and priority of security interests in personal property, including “general intangibles” which include intellectual property, are governed by Division 9 (Secured Transactions) of the California Uniform Commercial Code (“Article 9”), unless federal law preempts Article 9. In order to determine where to perfect a security interest for each type of intellectual property, and since copyrights, trademarks, and patents are all governed by different statutes and case law, it is important to review and analyze not only Article 9 but also the Copyright Act of 1976, 17 U.S.C. § 101 et. seq. (the “Copyright Act”), the Lanham Trademark Act of 1946, 15 § 1051 et. seq. (the “Lanham Act”), and the Patent Act of 1952, 35 U.S.C. § 101 et. seq . (the “Patent Act”).

1. Article 9 (Secured Transactions – California Uniform Commercial Code)

Article 9, which provides a comprehensive scheme for the regulation of security interests in personal property and fixtures, applies to “a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract.” California Uniform Commercial Code (“U.C.C.”) §§ 9109(a)(1), 9101 cmt. 1. However, Article 9 does not apply to the extent that a statute, regulation, or treaty of the United States preempts it. Id . § 9109(c)(1). Also, the filing of a financing statement is “not necessary or effective” to perfect a security interest in personal property subject to a “statute, regulation, or treaty of the United States” which provides a national filing system for the perfection of security interests. U.C.C. §§ 9310(b)(3), 9311(a)(1), 9311 cmt. 2. Before analyzing whether the Copyright Act, the Lanham Act, or the Patent Act preempt Article 9 with respect to perfecting a security interest in a copyright, trademark or a patent, as the case may be, it is necessary to review the provisions contained in Article 9 for the creation, attachment, perfection and prioritization of security interests.

Creation of Security Interest.

A “security interest”—which is an interest in personal property or fixtures which secures payment or performance of an obligation—is created by a “security agreement.” U.C.C. §§ 1201(b)(35), 9102(a)(73). The parties need not draft a separate document entitled “security agreement.” See Komas v. Future Systems , 71 Cal.App.3d 809, 814, 816 (1977). A security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors. U.C.C. § 9201(a). A “security interest” can be created in any “collateral,” which is defined as the property subject to a security interest, including the proceeds to which a security interest attaches. Id . § 9102(a)(12). “General intangibles” is a type of collateral and means any personal property, including things in action, other than types of collateral specifically exempted. Id . § 9202(a)(42). General intangibles include “various categories of intellectual property.” U.C.C. § 9102 Assem. Comm. cmt 5(d).

The security agreement which creates a security interest must sufficiently describe the collateral subject to the security interest, for evidentiary reasons. U.C.C. §§ 9108, 9203, 9108 Assem. Comm. cmt 1. A description of personal or real property in a security agreement is sufficient, whether or not it is specific, if it “reasonably identifies what is described.” U.C.C. § 9108(a). A description of collateral reasonably identifies the collateral if it identifies the collateral by any of the following: (1) specific listing; (2) category; (3) by type of collateral defined throughout the U.C.C., such as general intangibles; (4) quantity; (5) computational or allocational formula or procedure; or (6) any other method, so long as the identity of the collateral is “objectively determinable,” and the description of collateral does not merely state “all the debtor’s assets” or “all the debtor’s personal property.” Id . § 9108(b)-(e). The description of the collateral must “make possible the identification of the collateral described.” Id . §§ 9108, 9108 Assem. Comm. cmt. 2. A security agreement may also create or provide for a security interest in “after-acquired collateral” without requiring the creditor to take any further action—i.e., a “continuing general lien” or “floating lien.” U.C.C. §§ 9204(a), § 9204 cmt. 2.

Attachment of Security Interest

In order to perfect a security interest in a collateral, the security interest must first attach to the collateral. U.C.C. § 9308(a). A security interest attaches to collateral when it becomes “enforceable against the debtor with respect to the collateral.” Id . § 9203(a). A security interest is enforceable against the debtor and third parties with respect to the collateral only if: (1) value has been given; (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party, and, (3) the debtor has authenticated (i.e., executed) a security agreement that sufficiently provides a description of the collateral. Id . §§ 9203(b), 9102(a)(7).

Perfection of Security Interest

Under Article 9, the law of the jurisdiction of the debtor’s location governs the perfection of security interests in both tangible and intangible collateral, whether perfected by filing, automatically (through attachment), possession, or otherwise. U.C.C. §§ 9301, 9301 cmt. 4. A debtor who is an individual is located at the individual’s principal residence. Id . § 9307(b)(1). A registered organization, such as a corporation or a limited liability company, is located in the state under whose law it was organized. Id . §§ 9307(e), 9101 cmt. 4(c). A security interest is perfected if it has attached and if other requirements are met, including the possible filing of a financing statement. Id . §§ 9308(a), 9310(a). However, a financing statement does not need to be filed for security interests that are automatically perfected upon attachment, such as a purchase money security interest in consumer goods, or a sale of a promissory note. Id . §§ 9310(a)(1), 9309(1),(4). Further, a creditor may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession. Id . §§ 9313(a), 9310(a)(6). In fact, a security interest in money may be perfected only by taking possession. Id . § 9312(b)(3). More importantly to this article, the filing of a financing statement is “not necessary or effective” to perfect a security interest in personal property subject to a “statute, regulation, or treaty of the United States whose requirements for a security interest’s obtaining priority over the rights of a lien creditor with respect to the property preempt” the filing provisions contained in Article 9 (i.e., because the federal law provides a national filing system). U.C.C. §§ 9310(b)(3), 9311(a)(1), 9311 cmt. 2. If federal law preempts Article 9 with respect to perfection of a security interest, then a financing statement would not be filed and the creditor would need to record the security interest with the appropriate federal office—i.e., the United States Copyright Office (“Copyright Office”) for filings related to copyrights, and the United States Patent and Trademark Office (“USPTO”) for filings related to patents and trademarks. Case law analyzing whether any of the federal statutes preempts Article 9 with respect to perfection of a security interest in a particular intellectual property is discussed below.

i. Financing Statement

If federal law does not preempt Article 9 with re spect to perfecting a security interest in a particular intellectual property, a financing statement must be filed in the office of the Secretary of State, unless the collateral is real-estate-related, in which case a filing should generally be made with the county recorder’s office. U.C.C. § 9501. A financing statement must: (1) provide the name of the debtor; (2) provide the name of the secured party or a representative of the secured party; and (3) indicate the collateral covered by the financing statement. Id . § 9502(a)(1)-(3). The financing statement need not be signed by the debtor. Id . § 9502, cmt. 3. A financing statement sufficiently indicates the collateral that it covers if it provides either (1) a description of the collateral similar to that found in the security agreement as set forth above, or (2) an indication that the financing statement “covers all assets or all personal property.” Id . § 9504. A financing statement is effective for a period of 5 years after the date of filing, unless its effectiveness is continued or terminated. Id . §§ 9513, 9515(a).

ii. Priority

When more than one perfected security interest exists, the security interests rank according to priority in time of filing or perfection. U.C.C. § 9322(a)(1). A perfected security interest has priority over an unperfected security interest. Id . § 9322(a)(2). With respect to unperfected security interests, the first security interest to attach has priority. Id . § 9322(a)(3).

2. Perfecting a Security Interest in Intellectual Property

As a preliminary matter, it should be noted that most courts which have analyzed the proper place to record and perfect a security interest with respect to various types of intellectual property have conducted their analysis under (1) former U.C.C. § 9-104(a) (whether the federal statute governed the rights of parties affected by transactions) and (2) former U.C.C. § 9-302(3)(a) (whether the federal statute provided for national registration or specified a place of filing for a security interest different from that in the former U.C.C.). Under the revised Article 9, the analysis turns to whether the relevant federal statute (1) preempts Article 9 with respect to perfecting a security interest, as set forth in U.C.C. § 9109(c)(1), and (2) provides a national filing system for perfecting security interests, as set forth in U.C.C. § 9311(a)(1)—similar though not entirely the same analysis as was done in the former Article 9. Nonetheless, cases that have been published after the revised Article 9 went into effect have for the most part mirrored their analysis to the former Article 9 standards, and many of the cases have conflated the two issues set forth above into one issue or just analyzed both issues at the same time.

Under the Copyright Act, “copyright protection subsists . . . in original works of authorship fixed in any tangible medium of expression, ” including literary works, musical works, dramatic works, motion pictures and sound recordings. 17 U.S.C. § 102(a). The Copyright Act confers upon copyright owners the exclusive rights to reproduce the copyrighted work, prepare derivative works based upon the copyrighted work and distribute copies of the copyrighted work to the public by sale or other transfer of ownership. Id . § 106(1)-(3).

The Copyright Act provides that any “ transfer of copyright ownership or other document pertaining to a copyright” may be recorded in the Copyright Office, and further defines a “transfer of copyright ownership” as “an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright.” 17 U.S.C. §§ 101, 205(a) (emphasis added). A “hypothecation” means the “‘pledging of something as security without delivery of title or possession.’” Moldo v. Matsco, Inc. ( In re Cybernetic Servs., Inc. ), 252 F.3d 1039, 1056 (9th Cir. 2001), cert. denied , 534 U.S. 1130 (2002) ( quoting Black’s Law Dictionary 747 (7 th ed. 1999)).

Because 17 U.S.C. § 205(a) covers assignments and hypothecations of copyrights (i.e., security interests), it establishes a uniform method for recording security interests in copyrights and preempts Article 9 with respect to perfecting security interests in registered copyrights. Nat’l Peregrine, Inc. v. Capitol Fed. Sav. & Loan ( In re Peregrine Entm’t, Ltd .), 116 B.R. 194, 200-204 (C.D. Cal. 1990). Accordingly, the proper method for perfecting a security interest in a registered copyright is recording the security interest with the Copyright Office in order to give “all persons constructive notice of the facts stated in the recorded document,” rather than filing a financing statement under Article 9. Id . (quoting 17 U.S.C. § 205(c)); see also Aerocon Eng’g, Inc. v. Silicon Valley Bank ( In re World Auxiliary Power Co. ), 303 F.3d 1120, 1128 (9 th Cir. 2002); Morgan Creek Prods., Inc. v. Franchise Pictures LLC ( In re Franchise Pictures LLC ), 389 B.R. 131, 142 (Bankr. C.D. Cal. 2008); In re Avalon Software Inc. , 209 B.R. 517 (Bankr. D. Ariz. 1997). However, the perfection of an unregistered copyright must be done by filing a financing statement with the Secretary of State pursuant to Article 9—not by recording the security interest in the unregistered copyright with the Copyright Office. In re: World Auxiliary Power Company , 303 F.3d at 1128.

The Lanham Act defines a trademark to mean “any word, name, symbol, or device or any combination thereof” used by any person “to identify and distinguish his or her goods . . . from those manufactured or sold by others and to indicate the source of the goods.” 15 U.S.C. § 1127. The Lanham Act also provides registered trademark owners protection against any person who, without the trademark holder’s consent, uses the mark in connection with the sale, distribution or advertising of any goods or services, where such use is likely to cause confusion, mistake, or deception. Id . §§ 1125(a), 1141(1).

The Lanham Act provides that an “assignment shall be void against any subsequent purchaser for valuable consideration without notice, unless the prescribed information reporting the assignment is recorded in the United States Patent and Trademark Office within 3 months after the date of the assignment or prior to the subsequent purchase.” 15 U.S.C. § 1060(a)(4). Unlike the Copyright Act—which governs filings both with respect to assignments and transfer of security interests—the Lanham Act provides only for the recording of an assignment of a trademark with the USPTO, which does not include pledges, mortgages or hypothecation of trademarks. Joseph v. Valencia, Inc. ( In re 199Z, Inc .), 137 B.R. 778, 782 (Bankr. C.D. Cal. 1992) ; 15 U.S.C. § 1060(a)(4).

Trademark cases distinguish between security interests and assignments. Roman Cleanser Co. v. Nat’l Acceptance Co. of Am. ( In re Roman Cleanser Co .), 43 B.R. 940, 944 (Bankr. E.D. Mich. 1984), aff’d , 802 F.2d 207 (6th Cir. 1986) . While a trademark assignment is an absolute transfer of the entire right, title and interest in and to the trademark, the grant of a security interest is not such a transfer. Id . Rather, the grant of a security interest is merely “a device to secure an indebtedness,” or “a mere agreement to assign in the event of a default by the debtor.” Id . Given that the Lanham Act only covers assignments of trademarks and the fact that a security interest in a trademark is not equivalent to an assignment, the filing of a security interest is not covered by the Lanham Act. Id . Thus, the Lanham Act does not preempt Article 9 and the manner of perfecting a security interest in trademarks is governed by Article 9, which means that the secured creditor must file a financing statement with the Secretary of State to perfect the security interest in the trademark. E.g., In re Roman Cleanser Co ., 43 B.R. at 944; In re 199Z, Inc., 137 B.R. at 782 (holding that secured party cannot perfect security interest in trademark by recording with the USTPO); Trimarchi v. Together Dev. Corp ., 255 B.R. 606, 610-11 (D. Mass. 2000) (holding that the Lanham Act does not preempt Article 9); In re Together Dev. Corp ., 227 B.R. 439 (holding that filing of security interest with the USPTO failed to perfect security interest); I n re Chattanooga Choo-Choo Co., 98 B.R. 792 (Bankr. E.D. Tenn. 1989) (holding that the U.C.C., not the Lanham Act, governs recordation of security interests in trademarks); Creditors’ Comm. of TR-3 Indus., Inc. v. Capital Bank ( In re TR-3 Indus .), 41 B.R. 128 (Bankr. C.D. Cal. 1984) . Arguably, if Congress intended to provide a means for recording security interests in registered trademarks—in addition to recording assignments of trademarks—it would have done so, as it did in the Copyright Act with respect to recording security interests in registered copyrights . In re Roman Cleanser Co ., 43 B.R. at 944; In re 199Z, Inc., 137 B.R. at 782.

Nonetheless, although cases uniformly suggest that a security interest in a trademark must be perfected by filing a financing statement with the Secretary of State of the state in which the debtor is located, it is recommended that a recording or filing also be made with the USPTO, especially since the USPTO has no authority to refuse to record a filed document on the ground that it is not a valid assignment. In re Ellison Publications, Inc. , 182 U.S.P.Q. 498, 1974 WL 19944 (Comm’r Pat. & Trademarks 1974). Filing a financing statement with the Secretary of State and recording the security interest with the USPTO will ensure that lien creditors and subsequent lenders and purchasers are all on notice of the security interests.

On a related note, when recording an assignment of a trademark in the USPTO, a creditor should make sure that the trademark is assigned together “with the goodwill of the business in which the mark is used.” 15 U.S.C. § 1060. Because a trademark is merely a symbol of goodwill and it has no independent significance apart from the goodwill it symbolizes, it cannot be sold or assigned apart from the goodwill it symbolizes. Marshak v. Green, 746 F.2d 927 (2d Cir. 1984). A sale of a trademark without its goodwill is an “assignment in gross” and is not a valid assignment. 1 J.

Thomas McCarthy, McCarthy on Trademarks and Unfair Competition , § 18:3 (4th ed. 1996).

The Patent Act grants inventors and discoverers of “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” the right to obtain a patent, which must be novel and nonobvious. 35 U.S.C. §§ 101-103. The Patent Act protects the inventor or discoverer of the patent who applies for and pursues the patent from infringers who use or sell the patented invention without authority. 35 U.S.C. § 271(a).

The Patent Act provides that an “assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.” 35 U.S.C. § 261. The Ninth Circuit has held that the terms “assignment, grant or conveyance” refer to ownership interests only, and a security interest in a patent that does not involve a transfer of the rights of ownership is a “mere license” and not an “assignment, grant or conveyance” within the meaning of 35 U.S.C. § 261. In re Cybernetic Servs., Inc. , 252 F.3d at 1052. Since 35 U.S.C. § 261 provides that only an “assignment, grant or conveyance shall be void” as against subsequent purchasers and mortgagees, only transfers of ownership interests need to be recorded with the USPTO. Id. Unlike the Copyright Act, which refers to a transfer of ownership, which is further defined to include any “hypothecation” (i.e., the pledging of something as security without delivery of title or possession), the Patent Act does not refer to hypothecation, or to any security interests. Id . at 1056. The Patent Act does not preempt Article 9 with respect to filing security interests in patents, and a transaction that grants a creditor a security interest in a patent but does not effect a transfer of title or ownership is not the type of “assignment, grant or conveyance” that is referred to in 35 U.S.C. § 261. Id . at 1058. Accordingly, the proper method to perfect a security interest in a patent against subsequent lien creditors is to file a financing statement with the Secretary of State, in accordance with Article 9, rather than to record the interest with the USPTO. Id ; Pasteurized Eggs Corp. v. Bon Dente Joint Venture ( In re Pasteurized Eggs Corp .), 296 B.R. 283, 291-292 (D.N.H. 2003); In re Transportation Design and Technology, Inc ., 48 B.R. 635, 638-639 (Bankr. S.D. Cal. 1985); City Bank and Trust Co. v. Otto Fabric, Inc ., 83 B.R. 780 (D. Kan. 1988); Chesapeake Fiber Packaging Corp. v. Sebro Packaging Corp ., 143 B.R. 360, 369 (D. Md.) 1992). However, such a filing pursuant to Article 9 does not perfect security interests in patents against subsequent bona fide purchasers . In re Transportation Design and Technology, Inc ., 48 B.R. 635, 638-639 (Bankr. S.D. Cal. 1985). In order to properly perfect a security interest in patents against both future lien creditors and subsequent purchasers or mortgagees for value, it is best to file a financing statement with the Secretary of State, and to record the security interest with the USPTO. See Rhone-Poulence Agro, S.A. v. DeKalb Genetics Corp ., 284 F.3d 1323 (Fed. Cir. 2002) (noting that a secured creditor should record the security interest with the USPTO to perfect the security interest against a bona fide purchaser or mortgagee).

In summary, after reviewing Article 9, along with the Copyright Act, the Lanham Act and the Patent Act, and the case law interpreting those statutes, here’s what appears to be the consensus: (1) to perfect a security interest in a registered copyright, the secured creditor must record the security interest with the Copyright Office (2) to perfect a security interest in an unregistered copyright, the secured creditor must file a financing statement with the Secretary of State of the state where the debtor is located, (3) to perfect a security interest in trademark (whether registered or not), the secured creditor must file a financing statement with the Secretary of State of the state where the debtor is located, (4) to perfect a security interest in a patent against subsequent lien creditors , the secured creditor must file a UCC financing statement with the Secretary of State of the state where the debtor is located, and (5) to perfect a security interest in a patent against subsequent bona fide purchasers , the secured creditor must record the security interest with the USPTO. Nonetheless, due to the fact that some of the cases were decided under the former Article 9, and to ensure that the secured creditor is completely protected against subsequent lien creditors and bona fide purchasers, it is recommended that when perfecting a security interest in a copyright, trademark or a patent, that the secured creditor file both a financing statement with the Secretary of State of the state where the debtor is located, and to record the security interest with the Copyright Office (for copyrights) or with the USPTO (for patents and trademarks).

§ 9-514. ASSIGNMENT OF POWERS OF SECURED PARTY OF RECORD.

(a) [Assignment reflected on initial financing statement.]

Except as otherwise provided in subsection (c), an initial financing statement may reflect an assignment of all of the secured party 's power to authorize an amendment to the financing statement by providing the name and mailing address of the assignee as the name and address of the secured party.

(b) [Assignment of filed financing statement.]

Except as otherwise provided in subsection (c), a secured party of record may assign of record all or part of its power to authorize an amendment to a financing statement by filing in the filing office an amendment of the financing statement which:

(1) identifies, by its file number , the initial financing statement to which it relates;

(2) provides the name of the assignor; and

(3) provides the name and mailing address of the assignee.

An assignment of record of a security interest in a fixture covered by a record of a mortgage which is effective as a financing statement filed as a fixture filing under Section 9-502(c) may be made only by an assignment of record of the mortgage in the manner provided by law of this State other than [the Uniform Commercial Code].

Search Search Please fill out this field.
Personal Finance

What Is Security Interest? Definition and Legal Requirements

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

What Is a Security Interest?

Security interest is an enforceable legal claim or lien on collateral that has been pledged, usually to obtain a loan. The borrower provides the lender with a security interest in certain assets, which gives the lender the right to repossess all or part of the property if the borrower stops making loan payments. The lender can then sell the repossessed collateral to pay off the loan.

Key Takeaways

A security interest on a loan is a legal claim on collateral that the borrower provides that allows the lender to repossess the collateral and sell it if the loan goes bad.
A security interest lowers the risk for a lender, allowing it to charge lower interest on the loan.
Lower interest means that the borrower’s cost of capital will also be reduced.

Understanding a Security Interest

Securing interest on a loan lowers the risk for the lender and, in turn, allows the lender to charge lower interest, thereby lowering the cost of capital for the borrower. A transaction in which a security interest is granted is called a “secured transaction.”

Granting a security interest is the norm for loans such as auto loans, business loans, and mortgages, collectively called secured loans . Credit cards, however, are classified as unsecured loans . The credit card company will not repossess the clothes, groceries, or vacation you purchased with the card on which you default. Signature loans are another example of unsecured loans. The main difference between these two types of loans is the absence or presence of collateral.

The Uniform Commercial Code (UCC) specifies three requirements for a security interest to be legally valid, a process known as “attachment.”

The security interest is given a value.
The borrower owns the collateral.
The borrower has signed a security agreement .

Further, the collateral must be specifically described in the security agreement. For example, the security listed in the loan agreement might specify the borrower’s 2013 Honda Accord, not “all of the borrower’s vehicles.”

The lender must also “perfect” its security interest to make sure no other lender has rights to the same collateral. A perfected security interest is any secure interest in an asset that cannot be claimed by any other party. The interest is perfected by registering it with the appropriate statutory authority, so that it is made legally enforceable and any subsequent claim on that asset is given a junior status . As a note, a deed of reconveyance proves that a bank no longer has a security interest over a property.

A perfected security interest is a secure interest in an asset owned solely by the borrower and must be registered with the appropriate statutory authority.

Examples of Security Interests

Let’s say Sheila borrowed $20,000 to buy a car and stopped making payments when her loan balance was $10,000 because she lost her job. The lender repossesses her car and sells it at auction for $10,000, which satisfies Sheila’s loan balance. Sheila no longer has her car, but she also no longer owes the lender any money. The lender no longer has a bad loan on its books.

Another situation in which a lender might require the borrower to grant a security interest in assets before it will issue the loan is when a business wants to borrow money to purchase machinery and equipment. The business would grant the bank a security interest in the machinery and, if the business is unable to make its loan payments, the bank would repossess the machinery and sell it to recoup the money it had lent. If the business stopped paying its loan due to bankruptcy, its secured lenders would have precedence over its unsecured lenders in making claims on its assets.

Uniform Law Commission. " Uniform Commercial Code Revised Article 9. Secured Transactions; Sales of Accounts and Chattel Paper ," Page 56. Accessed April 7, 2021.

Uniform Law Commission. " Uniform Commercial Code Revised Article 9. Secured Transactions; Sales of Accounts and Chattel Paper ," Page 2. Accessed April 7, 2021.

Terms of Service
Editorial Policy
Privacy Policy
Your Privacy Choices

Find a Lawyer
Ask a Lawyer
Research the Law
Law Schools
Laws & Regs
Newsletters
Justia Connect
Pro Membership
Basic Membership
Justia Lawyer Directory
Platinum Placements
Gold Placements
Justia Elevate
Justia Amplify
PPC Management
Google Business Profile
Social Media
Justia Onward Blog

Grant of Security Interest Contract Clauses (532)

Grouped into 23 collections of similar clauses from business contracts.

Bankruptcy Lawyers
Business Lawyers
Criminal Lawyers
Employment Lawyers
Estate Planning Lawyers
Family Lawyers
Personal Injury Lawyers
Estate Planning
Personal Injury
Business Formation
Business Operations
Intellectual Property
International Trade
Real Estate
Financial Aid
Course Outlines
Law Journals
US Constitution
Regulations
Supreme Court
Circuit Courts
District Courts
Dockets & Filings
State Constitutions
State Codes
State Case Law
Legal Blogs
Business Forms
Product Recalls
Justia Connect Membership
Justia Premium Placements
Justia Elevate (SEO, Websites)
Justia Amplify (PPC, GBP)
Testimonials

Patent Laws, Regulations, Policies & Procedures
Manual of Patent Examining Procedure
Chapter 0300
Section 313

313 Recording of Licenses, Security Interests, and Documents Other Than Assignments [R-07.2015]

In addition to assignments and documents required to be recorded by Executive Order 9424, upon request, assignments of applications, patents, and registrations, and other documents relating to interests in patent applications and patents will be recorded in the Office. See 35 U.S.C. 261 and 37 CFR 3.11 . Other documents affecting title to applications, patents, and registrations will be recorded as provided in 37 CFR Part 3 or at the discretion of the Director. 37 CFR 3.11(a) .

In addition to documents that constitute a transfer or change of title, other documents relating to interests in patents or applications will generally be recorded. Typical of these documents which are accepted for recording are license agreements and agreements which convey a security interest. Such documents are recorded in the public interest in order to give third parties notification of equitable interests or other matters relevant to the ownership of a patent or application. Documents that are not accepted for recording include attorney's liens against patents or patent applications. See In re Refusal of Assignment Branch to Record Attorney's Lien, 8 USPQ2d 1446 (Comm'r Pat. 1988).

Any document returned unrecorded, which the sender nevertheless believes represents an unusual case which justifies recordation, may be submitted to the Office of Petitions with a petition under 37 CFR 1.181 requesting recordation of the document.

The recordation of a document is not a determination of the effect of the document on the chain of title. The determination of what, if any, effect a document has on title will be made by the Office at such times as ownership must be established to permit action to be taken by the purported assignee in connection with a patent or an application. See MPEP § 324 and § 325 .

301.01-Accessibility of Assignment Records
302.01-Assignment Document Must Be Copy for Recording
302.02-Translation of Assignment Document
302.03-Identifying Patent or Application
302.04-Foreign Assignee May Designate Domestic Representative
302.05-Address of Assignee
302.06-Fee for Recording
302.07-Assignment Document Must Be Accompanied by a Cover Sheet
302.08-Mailing Address for Submitting Assignment Documents
302.09-Facsimile Submission of Assignment Documents
302.10-Electronic Submission of Assignment Documents
303-Assignment Documents Not Endorsed on Pending Applications
304‑305-[Reserved]
306.01-Assignment of an Application Claiming the Benefits of a Provisional Application
307-Issue to Non-Applicant Assignee
308-Issue to Applicant
309-Restrictions Upon Employees of U.S. Patent and Trademark Office
310-Government License Rights to Contractor-Owned Inventions Made Under Federally Sponsored Research and Development
311-Filing of Notice of Arbitration Awards
312-[Reserved]
313-Recording of Licenses, Security Interests, and Documents Other Than Assignments
314-Certificates of Change of Name or of Merger
315-Indexing Against a Recorded Certificate
316-[Reserved]
317.01-Recording Date
317.02-Correction of Unrecorded Returned Documents and Cover Sheets
317.03-Effect of Recording
318-Documents Not to be Placed in Files
319-[Reserved]
320-Title Reports
321‑322-[Reserved]
323.01(a)-Typographical Errors in Cover Sheet
323.01(b)-Typographical Errors in Recorded Assignment Document
323.01(c)-Assignment or Change of Name Improperly Filed and Recorded by Another Person Against Owner’s Application or Patent
323.01(d)-Expungement of Assignment Records
324-Establishing Right of Assignee To Take Action in Application Filed Before September 16, 2012
325-Establishing Right of Assignee To Take Action in Application Filed On or After September 16, 2012

United States Patent and Trademark Office

Accessibility
Privacy Policy
Terms of Use
Emergencies/Security Alerts
Information Quality Guidelines
Federal Activities Inventory Reform (FAIR) Act
Notification and Federal Employee Antidiscrimination and Retaliation (NoFEAR) Act
Budget & Performance
Freedom of Information Act (FOIA)
Department of Commerce NoFEAR Act Report
Regulations.gov
STOP!Fakes.gov
Department of Commerce
Strategy Targeting Organized Piracy (STOP!)
USPTO Webmaster