Secured financing of intellectual property assets and the reform of English personal property security law

Oxford Journal of Legal Studies

Volumn 26, Issue 3, 2006, Pages 559-583

  Davies, Iwan ^a  

^a SWANSEA UNIVERSITY   (United Kingdom)

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EID: 33748884958     PISSN: 01436503     EISSN: 14643820     Source Type: Journal    
DOI: 10.1093/ojls/gql018     Document Type: Article

References (149)

1. In England and Wales, the principal statutes are the Patents Act 1977, Trade Marks Act 1994, Registered Designs Act 1949, the Copyright Designs and Patents Act 1988.
2. These include designs, database rights, plant breeder's rights, and rights in digital circuit layouts.
3. These are essentially procedural in nature and are, as such, weaker rights than the IP rights which arise under the intellectual property statutes.
4. A distinction should be drawn between intangible assets and intangible value. This goes to the nature of the analytical method of valuation of IP assets. See below.
5. Firms will usually use internal sources of finance before seeking external funding. See Cosh and Hughes, 'Size, Financial Structure and Profitability: UK Companies in the 1980s' in Hughes and Storey (eds) Finance and the Small Firm (1994).
6. See Poutziouris, Chittenden and Michaelas, The Financial Development of Smaller Private and Public SMEs (1999) Manchester Business School.
7. See Bezant, 'The Use of IP as Security for Debt Finance' (1998) 1 Journal of Knowledge Management 237.
8. See generally Cosh and Hughes (eds) Enterprise Britain: Growth, Innovation and Public Policy in the Small and Medium Enterprise Sector (Cambridge: ESRC Centre for Business Research 1998).
9. See Law Commission Consultation Paper No 164, Registration of Security Interests: Company Charges and Property other than Land (2002)
10. Law Commission Consultation Paper No 176, Company Security Interests (2004)
11. Law Commission Report No 296, Company Security Interests (2005).
12. See generally Cosh and Hughes above n 8.
13. In the USA, 40% of debt issued to small businesses is unsecured. See, for example, Booth, 'Contract Costs, Bank Loans and the Cross-Monitoring Hypothesis' (1992) 31 J Fin Econ 25.
14. For a general discussion on unsecured debt within the UK see Tudela and Young 'The distribution of unsecured debt in the United Kingdom: Survey evidence' Bank of England Quarterly Bulletin, Winter 2003.
15. In the USA, for example, credit cards provide the primary source of working capital for 5% of small businesses. See Oppenheim, 'Bank Financing Up, Loans from Relatives Down' [1997] American Banker 5.
16. By using credit cards it is possible for a business to avoid the need to grant security to secure business debt. The total extent of borrowing by credit cards in the UK was £113bn in 2003. See Credit Card Research Group Report (2003).
17. Their standardised nature has adversely affected the role of the local bank manager in lending. See Bank of England Report Finance for Small Firms, Tenth Report (2003) at para 4.22.
18. In the consumer context, there has been much debate in the US that credit scoring creates structural inequity in that it discriminates against sectors of the community in accessing credit. See, for example, Havard 'Democratizing Credit: Examining The Structural Inequities of Subprime Lending' (2006) 56 Syracuse Law Review 233.
19. A further mechanism used by financiers in making on-going financial decisions is the use of commercial intelligence based on objective information which can, in effect, act as an early warning system. It is very costly to monitor the actual current financial and legal position of small businesses, although information is available from commercial databases about the industry sector in question, including county court judgments linked to a particular sector, as well as behavioural analysis algorithms which are designed to identify patterns of unusual behaviour before an objective event of distress.
20. The British Bankers' Association Code of Practice requires banks to explain why they have rejected a borrowing application, if asked by the customer. Even so, there is a widespread lack of understanding about how banks use scoring systems which in itself could provide a source of tension between banks and their small business customers. See Bank of England Report above n 13 at para 4.28.
21. For a discussion on the priority order see Re Leyland Daf Ltd (also known as Bucklor v Talbot) [2004] UKHL 9.
22. See Scott, 'Rethinking the Regulation of Coercive Creditor Remedies' (1989) 89 Col LR 730 at 746-748.
23. See generally Baird, 'Security Interests Reconsidered' (1994) 80 Virginia LR 2249.
24. Policy issues arise in respect of non-consensual creditors, for example, tort victims who do not have the opportunity of taking guarantees. Compare Finch 'Security, Insolvency and Risk: Who Pays the Price?' (1999) 62 MLR 633. If the owner-manager is incentivised to pay off the creditor with a personal guarantee, the issue of voidable preference will arise in an insolvency context.
25. See Franks and Sussman, The Cycle of Corporate Distress, Rescue and Dissolution: A Study of Small and Medium Size UK Companies (2002) London Business School IFA Working Paper 306. From this survey it emerges that the financial support of bankers is important in allowing companies that get into financial difficulty to trade out of this. Such companies were placed in 'rescue units'. The reasons for sending companies to such a unit included failure to make important payments of interest or frequent breaches of borrowing limits or a request for larger borrowing facilities accompanied by a deterioration in the business environment. The objective was to provide assistance to the borrower. The business support units of three of the large UK clearing banks had on average SMEs where the profile of the average debt owed by the company to its shareholder-directors amounted to 6.1%, 2.5% and 2.4% of the total debt outstanding. Whilst as a percentage share of the total debt this is small, the amounts at stake from the point of view of the owner-manager are considerable, especially when bearing in mind the guarantees and the equity held in the business.
26. Compare the so-called Modigliani and Miller Irrelevance Hypothesis. See Modigliani and Miller, 'The Cost of Capital, Corporation Finance and the Theory of Investment' (1958) 48 Am Econ Rev 261 who argued that altering the capital structure of a corporate entity should not change its value. Creditors would adjust the interest rate charged for debt and the amount they would pay for an equity interest in the company to reflect the riskiness of the investment. These adjustments thereby offset any benefit.
27. The literature considering the issue of the efficiency hypothesis for secured credit is voluminous. For a discussion, see Mokal, 'The Search for Someone to Save: A Defensive Case for the Priority of Secured Credit' (2002) 22 OJLS 687
28. McCormack, Secured Credit under English and American Law (2004).
29. Above n 20. This is also borne out in the US literature.
30. Security gives creditors access to managerial information and a right in certain circumstances to be represented on the board.
31. Prior to the implementation of the Enterprise Act 2002 there was concern by banks that secured lending would be compromised and that therefore financial support provided by banks would dry up. Under the original Enterprise Bill it was anticipated that the new administration process would be court-driven and as a concession, partly because of concern that in an economic downturn courts could become clogged up, there is now provision for a company to be placed in administration through appointment by a floating charge holder. By s248 Enterprise Act 2002, Part II Insolvency Act 1986 is replaced by Schedule B1 of Schedule 16 to the former Act. Section 250 Enterprise Act 2002 inserts Chapter IV after Chapter III of Part III Insolvency Act 1986 whereby, under s72A, the holder of a qualifying floating charge (post-15 September 2003) is prohibited from appointing an administrative receiver of a company. Creditors with floating charges pre-15 September 2003 are able to appoint an administrative receiver for so long as the charge remains operative. It appears therefore that, notwithstanding the stated aim of the White Paper preceding the Act to abolish administrative receivership, the procedure will continue to be an option for some time. In addition, the abolition of administrative receivership is only partial, as seen in ss72B-72G. It should also be noted that s72A does not preclude the appointment of a receiver over fixed charge assets.
32. Above n 20.
33. The Survey ibid identified that approximately 75% emerged from the rescue units and avoided formal insolvency procedures. The remaining 25% entered some form of insolvency.
34. The alleged advantage of lower interest rate with security does not apply to financially strong firms because the issue of probable default is not a concern. See Mann, 'Explaining the Pattern of Secured Credit' (1997) 110 Harv LR 625.
35. Lasfer, 'Debt Structure, Agency Costs And Firm's Size: An Empirical Investigation' (24 Nov 1999) available at http://www.staff.city.ac.uk/ m.a.lasfer/wopapers/mez/debtStructure.pdf. This is a study of all companies quoted on the London Stock Exchange 1984-1996 which showed that secured debt is negatively related to firm size. Indeed, the proportion of small companies' debt that is secured is three times (61%) of that seen with larger companies (17%).
36. See Mokal above n 22.
37. Bank of England Report, Finance For Small Firms, Sixth Report (1999) at 25.
38. Ibid.
39. See Bank of England Report, Finance For Small Firms Ninth Report (2002) at para 2.32.
40. Association of Business Recovery Professionals Tenth Report Corporate Insolvency in the UK: A Decade of Change (2002) at 9.
41. Above n 30 at 26.
42. SMEs generally report problems in raising finance and the ability to use IP as security might remove a major barrier to growth. See Hall, 'Lack of Finance as a Constraint on the Expansion of Small Innovatory Firms' in Barber, Metcalf and Porteous (eds) Barriers to Growth in Small Firms (1989) pp39-57.
43. See Law Commission Consultation Paper No 164, Registration of Security Interests: Company Charges and Property other than Land (2002) at paras 2.6-2.19.
44. The possessory pledge is the most common and accepted European model for the creation of a security interest in movable property and this is based on the Roman law concept of pignus. The dilemma for the debtor with the pledge is its possessory nature: The collateral by being placed in the creditor's hands is unproductive and cannot be used to repay the credit secured on it. It is for this reason that the non-possessory registered or unregistered pledge has emerged in civilian jurisdictions. Increasingly, the term pledge is used in a looser sense to include non-possessory security over bonds and shares held in, for example, Euroclear in Brussels. For a general discussion see Davies, 'Retention of Title Clauses and Non-Possessory Security Interests' in Davies (ed) Security Interests in Mobile Equipment (2002) Chapter 9.
45. See Lipton, Security Over Australian Intellectual Property [1999] JIBL 227 at 281.
46. For example, by virtue of s90(4) Copyright, Designs and Patents Act 1988, a base licence of copyright material is binding on every successor in title to the interest in the copyright. On default, the mortgagee may only be able to sell the copyright on to a third party, subject to the rights of the mortgagor/licensor.
47. This appears to be the preferred option of technology-based SMEs. See, for example, Davies, Financing of Welsh SMEs and the Commodification of IP Rights IP Wales Research Report (2004).
48. See Patents Act 1977, s30
49. Trade Marks Act 1994, s24
50. Registered Designs Act 1949, s19.
51. Defined in s33(3) of the 1977 Act to include an 'assignment' and a 'mortgage'.
52. Trade Marks Act 1994, s25.
53. Trade Marks Act 1994, s25(2)(c).
54. Registered Designs Act 1949, s19(4).
55. See Townend, Using Intellectual Property As Security, The Intellectual Property Institute, (1996) at 24.
56. In the case of financing for films involving international agreements it is the practice in any event to produce multiple copies of the relevant documentation.
57. For a discussion on the consequences of non-registration see Law Commission Consultation Paper No 164, above n 36 at paras 2.26-28.
58. Law Commission Report No 296 Company Security Interests (2005) at paras 3.41 and 3.231. It is proposed to implement these recommendations through a new power to amend company law by way of a company law reform order introduced under the Companies Bill 2006.
59. Ibid at para 3.235.
60. See Regulation 25(1) of the Draft Statutory Instrument attached to the Law Commission Report ibid.
61. Trade Marks Act 1994, s25(3).
62. Jackson and Kronman, 'Secured Financing and Priorities Among Creditors' (1979) 88 Yale LJ 1143.
63. Above n 22. Since the debtor offering security decreases the creditor's risk of not being paid, the price for the utilisation of the creditor's money expressed in the interest rate charged should be lower for a secured rather than for an unsecured credit. The difficulty is to determine precisely the lowering of risk as a result of the security which should then be reflected in the interest rate charged.
64. See Note, 'The Inefficient Common Law' (1983) 92 Yale LJ 862.
65. Baird 'Notice Filing and the Problem of Ostensible Ownership' (1983) 12 J of Legal Studies 53.
66. 76 ER 809 (Star Chamber 1601). The Statute of Elizabeth (13 Eliz C S (1570)) was used to convict Twyne of fraud for leaving goods with Pierce, the debtor. The Statute of Elizabeth dealt only with the situation where an owner was transferring his property. It did not cover the situation where a buyer or other person received possession but the ownership had been retained. The original 'reputed ownership' prohibition was part of the Bankruptcy Act 1623 (21 Jac 1 C 19).
67. Holroyd v Marshall (1862) 10 HLC 191.
68. Finch, above n 19.
69. Cork Committee Report, Insolvency Law and Practice Cmnd 8558 (1982) para 109.
70. See Coogan, 'Article 9 of the Uniform Commercial Code: Priorities Among Secured Creditors and the "Floating Lien"' (1959) 72 Harv LR 838.
71. 268 US 353 (1925).
72. Goode and Gower, 'Is Article 9 of the UCC Exportable? An English Reaction' in Ziegel (ed) Aspects of Comparative Commercial Law (1969) at 318.
73. For a full discussion see Gilmore, Security Interests in Personal Property Vol 1 (1965).
74. The two sponsoring bodies of the UCC continue to be the American Law Institute (ALI) and the National Conference of Commissioners on Uniform State laws (NCCUSL).
75. Article 9:101 Comment.
76. A distinction is drawn under Article 9 between the enforceability of the security interest inter se and as against third parties. An agreement which creates or provides for a security interest, together with 'attachment' of the security interest are all that is required. For a general overview see Davies, 'The Reform of Personal Property Security Law: Can Article 9 of the US Uniform Commercial Code be a Precedent?' (1988) 37 ICLQ 465.
77. See Report of the Secretary General: Study on Security Interests YB of the UNCITRAL (1977) UN Dec A/CN 9/13.
78. There is a Permanent Editorial Board of the UCC which includes representatives from the NCCUSL and ALI which meets twice a year to deal with problems of interpretation of the UCC and makes recommendations for revision to the NCCUSL and ALI. A major revision of the UCC was completed in 1972.
79. The revised Article 9 is referred to as R9 and has been adopted in all the states in the US, including Louisiana. The text can be found at http://www.law.cornell.edu/ucc/9/.
80. Alces, 'Abolish the Article 9 Filing System' (1995) 79 Minnesota LR 679.
81. If priority was dependent on the parties' own records for the determination of priority, this would give an incentive to competing creditors to manipulate their agreements and advance the relevant dates. See McDonnell, 'The Floating Lienor as Good Faith Purchaser' (1977) 50 S Cal LR 129.
82. The Article 9 filing system does operate as an anti-fraud mechanism because the filing system establishes the date for perfection of the security interest so that it frustrates an attempt to usurp priorities. See Alces above at 702.
83. Scott, 'The Politics of Article 9' (1994) 80 Virginia LR 1763 at 1793-1794.
84. Whilst contracting creditors may be aware of the competing priority claimants by virtue of the Article 9 filing procedures, involuntary creditors such as tort claimants are not protected.
85. See Crowther Committee Report On Consumer Credit Cmnd 4596 (1971)
86. the Scottish Law Commission's Working Party on Security over Moveable Property (1986)
87. Diamond, A Review of Security Interests in Property DTI Report (1989).
88. The Company Law Review Steering Group, in its final report, Modern Company Law for a Competitive Economy (July 2001) provisionally concluded that the present company charges registration system should be replaced with the notice filing model adopted in Article 9.
89. In the Crowther, Halliday and the Diamond Reports, above n 75, neither security interests in intellectual property law nor the need for reform in this context were considered.
90. Above n 9.
91. For a discussion, see Davies 'Functionalism and the Reform of English Personal Property Security Law' (2004) 24 Legal Studies 295.
92. Above n 49 at para 3.292 where it is recommended that all charges that are registrable under IP statutes will be excluded from the proposed scheme.
93. An agreement to assign future inventions may be upheld when the agreement relates to improvements of named inventions and under s33(3)(b) of the Patents Act 1977 there is set down a procedure by which a notice of mortgage transaction can be recorded. This creates the possibility of a legal mortgage automatically arising under the grant of a patent. Section 91(2) of the Copyright, Designs and Patents Act 1988 provides for future interests in copyright by way of a legal mortgage, that is, which will or may come into existence in respect of a future work or class of work or on the occurrence of a future event. This will be important if a financier wishes to obtain on-going rights over future versions of, for example, software which is continuously upgraded or developed. Section 91(1) provides that, pursuant to an agreement by a prospective owner to assign the future copyright wholly or partially to another person, then, on coming into existence, the assignee or another person claiming under him would be entitled, as against all other persons, to require the copyright to be vested in him. In respect of a registered design under the Registered Designs Act 1949, there is no such provision for future designs and such a future interest can only be subject to a standard equitable mortgage or charge.
94. See Bezant, above n 7.
95. The adoption of such an approach extending to future patents in England and Wales would have design implications for the new registry. For example, it would be necessary for the patent security interest to be registrable against the originator and not only the patent number. If there was a requirement for registration only against a patent number, this could not be accommodated under an Article 9-type of regime with rules dealing with perfection of security interests in after-acquired property.
96. From a survey of technology-based SMEs, it appears this can take up to three months, above, n 40 at 64.
97. See Davies 'The Trade Debtor And The Quest For Security' in Rajak (ed) Insolvency Law: Theory and Practice (1993) Ch 3.
98. Under the Canadian and New Zealand schemes there may be a PMSI in any form of collateral other than investment property. A grace period is provided for registration of non-inventory collateral. In the case of intangible goods, the grace period runs from the attachment of the security interest.
99. Once information is released, there is the possibility of using the information to 'design around' the patent by producing a cheaper or more efficient product. This would not be an infringement of the patent but it could provoke costly litigation. Obsolescence may account for the high incidence of patents being allowed to lapse by the time of the first renewal fee obligation.
100. Information and reminder notices are sent by the appropriate Registrar in respect of renewal fees. A grace period is given within which time the right can be restored. See Patents Act 1977, s25(4), 28
101. Trade Marks Act 1994, s43(5)
102. Registered Design Act 1949, s8(4).
103. In the case of a computer software program, there may be a cluster of rights in a combination of copyrights, trademarks, trade secrets and licence rights in the underlying software, together with related documentation.
104. In these circumstances, the borrower will need to reserve rights to use the IP in the debtor's other products, notwithstanding a foreclosure of the creditor's rights in the IP.
105. It is sometimes the case that the know how may have been acquired by the company from third parties under licence and normally the licence is terminated on the insolvency of the company or the appointment of an insolvency practitioner. Where the know how represents the collective experience, including the management prowess of a team or a number of individuals employed by a business, it will be necessary for the financier to obtain an express right to solicit and hire the debtor's personnel in the event of foreclosure. Even so, the financier will be exposed to the risk that highly skilled employees may be lured to another business if they sense that the borrower's business is in financial difficulty. Whilst appropriate obligations concerning disclosure and non-disclosure can be made, there is often the problem of identifying precisely the information involved.
106. See Hagelin, 'Valuation of Intellectual Property Assets' (2002) 30 AIPLA QJ 353.
107. Clarkson, 'Avoiding Suboptimal Behaviour In Intellectual Asset Transactions: Economic and Organizational Perspectives on the Sale of Knowledge' (2001) 14 Harvard Journal of Law and Technology 712 at 716.
108. The commerciality of an intellectual asset can be problematical in terms of its suitability for security as an asset. For example, it can be transferred many times to multiple entities in different places through licensing which can be exclusive (to one licensee only) or non-exclusive; it may be limited to a geographical region and/or to a specific time period and/or for a specific purpose or field of use. Additionally, some licensees are permitted to sublicence the right to a technology. Licensing is not a simple conveyancing issue, as it may have profound strategic repercussions to a business when many technology companies are engaged in 'cross-licensing' with competitors (using each others' patents or copyrights).
109. See Bezant, above n 7. Prior to the 1960s, business assets generally consisted of those tangible assets that were listed on the accounts of the borrower. Verification was achieved by physically viewing the assets, checking the receivables and reviewing the debt instruments. Even tangible assets today have a large intangible component to them through copyright, trademarks or patents. IP has become increasingly valuable as such rights cover the key technology of a going concern or they may be licensed to third parties as an important source of revenue.
110. In June 2001, the US Financial Accounting Standards Board (FASB) unanimously approved Statement 141, Business Combinations and Statement 142 Goodwill and Other Intangible Assets. See http://www.fasb.org/st/ summary/stsum142.shtml. The effect is that every organisation that does business in the USA have to determine the fair market value of their intangible assets, rather than rely on historic values. This has significance because US companies consequently have to adopt a rigorous and controlled method for tracking and valuing their IP.
111. See Bezant and Punt, The Use of Intellectual Property as Security for Debt Finance Arthur Andersen and the Intellectual Property Institute (1997).
112. The starting point in any IP valuation is to identify the proper premise for valuation. The following factors are relevant: First, the circumstances under which a prospective willing buyer and a prospective willing seller would operate at the time of the envisaged transaction; second, the identity and economic profile of actual or prospective buyers; third, whether the IP asset is being sold as part of a going concern or on a stand-alone basis. Valuation for the purpose of realization of security will often depend upon the IP being available as part of the sale of an overall business as a going concern. If no general market is available, individual purchasers will need to be identified and because of this, the price obtained may not be a guide to a price obtained for another piece of IP.
113. In the case of Microsoft it is 99.5%. See generally Gosling and Derwent, Hidden Value: The Derwent Guide to Managing IP (2001).
114. See Posner, Economic Analysis of Law 5th Ed (1998) at 14-15.
115. See generally Tenenbaum 'Valuing Intellectual Property Assets' (2002) 19 The Computer and Internet Lawyer 1.
116. See Manton, Integrated Intellectual Asset Management (2006) Chapter 16.
117. This values an asset by the present worth of the net anticipated economic benefit of the asset. In this respect, micro-economic data is required, such as market data indicating the gross sales and net income derived from the sale of products covered by the patent and the revenue derived from licensing the patent.
118. This seeks to value on the basis of the value given to other similar assets in an active public market. Such an approach is difficult because no two IP assets are similar enough for the sale price of one to define the other.
119. This values an asset by the cost of replacing that asset. This is inappropriate because by definition IP assets are novel and often cannot be replaced.
120. See Neifeld, 'A Macro-Economic Model Providing Patent Valuation and Patent Based Company Indicators' (2001) 83 Journal of the Patent and Trademark Office Society 211.
121. Licensing operates in both directions. It can also be a means of consolidating a commercial relationship between two parties such as through technology transfer, contract research and franchising.
122. Globally, the technology transfer market is substantial and is estimated to be approximately $100B. In the USA, overseas licensing revenue is in excess of $30B. If a grossing-up exercise is made based on US figures, on the assumption of an average 4-5% royalty rate, the value of IP-based exports is now around the same as that for goods. In the five largest OECD economies, IP earnings from overseas in the form of royalties and licence fees grew about as fast as all service exports between 1993 and 1996- increasing by over 73% in Japan, 49% in the US and 52% in the UK. See Clarkson, above n 93.
123. The licence establishes market credibility, that is, there is an established market. The present value of the income stream can be determined. In the film industry, for example, advance licences is the basis for security and the issue here relates to the estimate of the value of these licences. Also, in the case of successful authors of books, a credit advance is often made based on track record. Similarly, established musicians can raise finance secured on the revenues from copyright portfolios.
124. See Security Interests In Intellectual Property Seminar Report Intellectual Property Institute (1999) at 13
125. Licences often place obligations on licensors such as technical support, development and, for example, 'patches' where software deficiencies emerge. Lenders may not wish to take this responsibility, as this may include statutory obligations. To avoid these responsibilities, lenders do not use licences as security but rather focus upon the income stream generated by the licences.
126. A portfolio of licences is extremely appealing as this reduces the uncertainty of a single licence, for example, the liquidity of the licensee and also the default risk.
127. The industry context is obviously highly relevant. There are few problems of valuation in copyright-dependent industries such as film and music, as this IP is 'stand-alone' from the rest of the business. Royalties are easy to identify and assess from projected retail sales and market demand. The IP is exploited through licensing which generates royalty income which can then form the basis of security.
128. See, for example, Katz and Shapiro, 'How to License Intangible Property' (1986) 101 QJ Econ 567.
129. Pakes, 'On Patents, R&D and the Stock Market Rate of Return' (1985) 93 J Pol Econ 390.
130. See Clarkson, above n 93.
131. Goldscheider, 'Measuring Damages in US Patent Litigation' (1993) 5 J Proprietary Rights 2.
132. Smith and Parr, Valuation of Intellectual Property and Intangible Assets 3rd ed (2000) at 368.
133. Megantz, How To License Technology (1996) at 56-59.
134. See Razgaitis, Early-Stage Technologies: Valuation And Pricing (1999) p102.
135. Clarkson, above n 93 at 714.
136. See Parr and Sullivan, Technology Licensing: Corporate Strategies for Maximizing Value (1996).
137. The complexity of the royalty calculation is such that a significant proportion of European companies that licence their IP to third parties do not use royalty investigations to ensure that the proper royalties are received. Under-reporting of licences is common, often because of the complexity of the agreements, cost saving approximations and genuine misunderstandings. See Intellectual Gold, KPMG Survey of Intellectual Property (2002).
138. Nimmer and Krauthaus, 'Secured Financing And Information Property Rights' (1987) 2 High Technology LJ 195.
139. These include filing costs such as registration fees and the time costs of registration, as well as search costs including the time costs of searching.
140. Jackson and Kronman, above n 53.
141. Baird 'Secured Lending And Its Uncertain Future' (2004) 25 Cardozo LR 1989
142. Rasmussen 'Secured Credit Control Rights And Options' (2004) 25 Cardozo LR 1935.
143. Law Commission Report No 296, Company Security Interests, above n 49.
144. The type of trading contract needs to take into account what is traded and it is arguable for example, that sale of goods legislation needs to be reformed to take into account whether one is dealing with goods, services, intangibles or combinations of these. A 'hub and spoke' model has been discussed in the USA with the general sales provision in Article 2 of the UCC dealing with 'information products' whilst spokes could then be added to cover more complex or specific issues. See Nimmer, 'Intangibles Contracts: Thoughts of Hubs, Spokes and Reinvigorating Article 2' (1994) 35 William and Mary LR 1337.
145. Lipton Security Over Intangible Property (2000) at 177. A variant of this could be extended to cover information assets, that is, the 'owner' of an 'information product' should be able to control copying, access, use and disclosure of the information in question.
146. See Nimmer and Krauthaus, 'Information as a Commodity: New Imperatives of Commercial Law' (1992) 55(3) Law and Contemporary Problems 103 at 113-114.
147. Gray 'Property in Thin Air' (1991) 50 Cambridge LJ 252
148. Eleftheriadis 'The Analysis of Property Rights' (1996) 16 Oxford Journal of Legal Studies 31.
149. Uncertainty in terms of the creation of an effective security interest in IP may cause a lender to desist from extending credit. Perhaps the most dramatic example of this phenomenon within common law jurisdictions was the US Ship Mortgage Act 1920. This was designed to encourage the private financing of shipbuilding after the First World War by providing lenders with an extensive security device. Questions concerning the constitutionality of this legislation meant that it was not used and the financing of shipbuilding was in fact depressed. See Gilmore, Security Interests in Personal Property Vol 1 (1965) at 408.