Security Rights in Intellectual Property in Germany

Abstract

Intellectually property and collateral are two of the most important areas in commerce and law. Germany is no exception to this. However, the area of security rights in intellectual property is a whole new ball game. In German practice, IP rights are only seldom—if ever—used to secure a loan. This is certainly not because of a lack of options. As this chapter will demonstrate, German law offers a multitude of security rights in IP rights and licences: the pledge of rights, the security assignment, the security usufruct, and the security licence. Rather, there are various legal and practical reasons why IP rights are rarely used as collateral. First, the pledge and security usufruct are both impractical due to enforcement restrictions. Second, a security assignment makes it virtually impossible to create junior security rights in the collateral. Third, the legal character of licences is unresolved, which leads to legal uncertainty, especially with regard to their treatment in insolvency. Practical difficulties further add to these impediments. The main problem is that there is no method to reliably assess the value of an IP right, much less the value the IP right might have at the time of realization. Furthermore, as there is no liquid market for many IP rights, it is very difficult to realize the value of an IP right after default.