PPSR Registrations and Intellectual Property
The Personal Property Securities Act 2009 (Cth) (PPSA) affects businesses in all sectors and industries. Specifically when it comes to Trade Mark, Copyright and Patent owners and the licensing of IP.
The Personal Property Securities Act 2009 (Cth) (PPSA) affects businesses in all sectors and industries. Specifically when it comes to Trade Mark, Copyright and Patent owners and the licensing of IP, owners will want to ensure to protect their revenue that an adequate PPSR registration is in place over the licensee of these assets.
Failing to register security interests on the Personal Property Securities Register (PPSR) – or failing to do so correctly and within strict timeframes – is a common pitfall with potentially dire consequences, including the risk of losing substantial assets. These underlying risks are often brought to light when grantors of security interests experience financial difficulties and their creditors take action. As such, in times of economic uncertainty, it is more vital than ever to ensure that your business has adequate procedures in place to identify security interests and to register them correctly and promptly.
Who is affected?
The application of the PPSA is extremely broad. In general terms, the PPSA governs “security interests” in “personal property” . Most types of property other than land are considered personal property for the purposes of the PPSA, including not only tangible property such as goods, equipment and cash, but also intellectual property, accounts, contracts, and shares and other financial property.
Security interests, meanwhile, include many types of interests that may not traditionally be thought of as “securities”, including interests that may arise under intellectual property licensing arrangements. Such as the use of a trade mark by a fashion manufacturer or fees for use of copyright.
In short, it is not always immediately obvious when an arrangement might give rise to a security interest, and every business should give serious consideration to whether it holds any interests that need to be registered on the PPSR. Parties who commonly hold security interests requiring registration include (among many others):
lessors of goods and equipment;
anyone who leaves their goods or equipment in the possession of another person, or on land owned by another person.
anyone who has a specific use of an intangible asset under a licence agreement which can be intellectual property
If you have any possible security registration matters make sure to reach out to our commercialisation team directly
Time is essential and what should you do?
To avoid these risks, security interests must be “perfected” in the manner required under the PPSA. In the vast majority of cases, this means registering the interest on the PPSR.
A registration on the PPSR must comply with strict requirements as to the way in which it describes the grantor of the security interest, the relevant property, and the type of security interest.
The registration must also be made within strict timeframes. Particular timeframes apply for security interests granted by companies, and “purchase money security interests” (a special type of security interest that is given priority over other interests provided that certain requirements are complied with).
Failure to register (and to do so correctly) within these timeframes can have consequences ranging from loss of priority over other creditors to the loss of your interest in the property.
Businesses that are likely to hold security interests should establish proper procedures for the registration of those interests (and should review existing arrangements to ensure that all relevant requirements have been complied with).
The requirements of the PPSA are by no means simple, and you should seek legal advice if you are at all unsure as to whether you need to register, or when and how you need to do so.
What are the risks and consequences of failure to register?
Failure to register or otherwise perfect security interests, and to comply with all legal requirements and timeframes in doing so, can result in losing your claim to property that is the subject of the security interest – even if it is property that you own.
Even errors that may seem minor or technical, such as a registration being made a day late, or referring to an ABN when an ACN is required, can result (and have resulted) in the loss of substantial assets for businesses.
What should you do if you haven’t registered?
While strict compliance with the requirements of the PPSA at the outset is the best way to ensure that your interests are protected, the risks associated with erroneous or late registrations can often be mitigated (or avoided entirely) by taking action sooner rather than later.
One of the most common examples is where a registration against a company is made outside of the timeframes prescribed by the PPSA and the Corporations Act 2001 (Cth). In these circumstances, the secured party can lose their interest in property if certain insolvency-related events occur in relation to the grantor of the security interest within six months after the registration is made. A secured party in this position should undertake a valid registration as soon as possible to “start the clock ticking” on this six-month period – especially if there is a risk that the grantor will experience financial difficulties in the near future.
In certain circumstances, applications can also be made to the court to extend the timeframes associated with registration.
If you are concerned that your business may have security interests that have not been registered – or have been registered improperly or outside of required timeframes – you should seek urgent legal advice as to the best course of action to protect your interests.
At Legum ILP our commercialisation team can assist you in identifying security interests your business may hold, establishing proper procedures for registering those security interests, and evaluating the best course of action where your business holds security interests that have not been validly registered within the required timeframes. We can also undertake a review of your licensing and supply agreements that you may have with current customers and ensure that you have adequate protection and authority to apply PPSR protections.
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