Neil B. CohenJeffrey D. Forchelli Professor of Law

Brooklyn Law School

Not a restatement of current law, but a guide to reform

Goals are economic in nature – facilitate use of movable property, both tangible and intangible, as collateral so as to facilitate increased access to credit at lower cost

Security rights in all types of movable property, both tangible and intangible

Limited exclusions

Recommendation 4(b)

Also governs sales of receivables

Functional approach – substance over form

General rules applying to all types of transactions creating security rights in all types of assets

Adjustments for particular types of asset and for particular types of transactions such as acquisition finance (e.g., purchase-money security rights/r.o.t.)

Created by agreement Writing required unless security right is

possessory (actual physical possession only, no constructive possession)

Security right may secure future obligations Security right may encumber after-acquired

assets Limited effectiveness of certain anti-

assignment clauses in receivables Automatic security right in proceeds

Several methods available Registration of notice (not recordation of

security agreement) Actual possession of tangible assets “Control” of bank account Notation on certificate of title or registration

in specialized registry

Primary method of third-party effectiveness Minimal information required

◦ Identifier (name) of grantor and secured creditor◦ Description of encumbered assets◦ Duration and maximum amount secured, if

applicable Indexed by grantor identifier Minimal fees – only enough to recover costs

of operation

Other secured parties◦ General rule: first to register or become effective

against third parties◦ Special “superpriority” rule for acquisition finance

Judgment creditors

Transferees of the collateral

Distinguish from enforcement of underlying rights, such as enforcement of an intellectual property right against an infringer or enforcement of receivable against debtor on the receivable

Judicial and non-judicial enforcement allowed

Basic concept of commercial reasonableness for non-judicial disposition

For tangible assets, most issues governed by law of the State in which asset is located

For intangible assets, most issues governed by law of the State in which grantor is located

Adjustments for security rights in intellectual property?