Intellectual Property Financing: Security Interests in Domain Names and Web Contents

Abstract

Intellectual property has become an increasingly valuable corporate asset. Not surprisingly, many companies use intellectual property for security purposes in commercial financing schemes. The recent revision of Article 9 of the Uniform Commercial Code (UCC) was drafted with a comprehensive understanding of how intellectual property has been used generally in commercial transactions and as collateral in secured transactions. The revised Article 9 aims to facilitate more financing schemes secured by intangible assets in electronic com- merce. Given the growth of borderless, electronic commerce, new intellectual property assets such as domain names and web contents are often the primary assets of online companies.3 If these assets are secured for purposes of obtaining financing for online companies, both the lender (creditor/investor) and the online company (debtor) should understand the nature of the assets and how a security interest in the assets is perfected. Most importantly, from the lender's side, having a perfected security interest will provide the lender priority in the intangible assets over the bankruptcy trustee in the event the online company is insolvent. From the online company's side, it is important to understand how the securing of intellectual property is achieved and what impact it may have on the company's daily operation.