New Zealand: The Personal Property Securties Act 1999 (PPSA) and Intellectual Property

Anyone buying, selling or licencing intellectual property (IP) assets in New Zealand or offering or taking them as security should be aware of the impact of the PPSA on those arrangements.

This paper addresses the impact of the law on personal property securities on IP assignments, licences and other transactions involving IP assets and gives some practical advice to those involved in such transactions.

The PPSA enables a party who has a registrable security interest over personal property to register that interest. A registered interest generally gives that secured party priority over the underlying personal property and enables them to enforce their rights in that property against third parties such as a liquidator. As a result, a secured party can repossess the personal property if the debtor breaches the terms of their security agreement with the secured party, regardless of whether the personal property has been on-sold.


The PPSA took effect in 2002 and governs "security interests" in "personal property".

"Personal property" is defined in the PPSA as including intangibles. Intangible property includes IP such as trademarks, patents, designs and copyright.

The PPSA defines a "security interest" as an interest in personal property (the "collateral") that in substance secures the payment or performance of an obligation without regard to the form of the transaction or the identity of the person who has title to the collateral.

The PPSA takes a functional approach to determining what constitutes a security interest. Under the PPSA, ownership is largely irrelevant and a person can no longer rely on title to protect their interest. The key question is whether or not the interest secures payment or performance of an obligation.

Anyone who has a security interest may register, and thereby "perfect", that interest on the Personal Property Securities Register (PPSR) which is a public online noticeboard where people can search and view information held online and in real time.


The ambit of the PPSA extends well beyond typical "secured loans". Some examples of security interests that may arise in IP transactions, and should therefore be registered on the PPSR to protect the secured party, are:

  • A security interest over an IP licence: While an IP licence is not itself a security interest, the licence does constitute personal property over which a security interest can be granted or taken if the interest in the IP licence secures payment or performance of some kind. Accordingly, an IP licence is not registrable on the PPSR, but if the licensor or licensee grants a security interest over that licence to a financier, for example, the security agreement evidencing that grant is registrable.
  • An assignment of IP with a reversionary interest: If IP is assigned on terms that provide for a transfer back to the original owner either on the expiration of a period of time or on default of the other party, this may amount to a security interest. These types of arrangements are sometimes used in place of an exclusive licence and are common in the film and music industries in respect of copyright works.
  • Joint ownership: The joint ownership of IP should be reviewed in light of the PPSA. Any part owner who is not the registered proprietor of the IP on, for example, the trademarks register, may have a registrable security interest in that IP.
  • Long term leases: If any property (e.g. prototypes) is supplied for an indefinite period, or for a period greater than 12 months, that supply may give rise to a security interest (or be a "deemed security interest" under the PPSA) and therefore be registrable.
  • Royalty streams: It may be possible for a security interest to exist over the proceeds or royalties payable under a licence as a separate form of security interest to the licence itself. The term "proceeds" is defined broadly enough in the PPSA to capture such payments. The right to receive those payments could amount to a security interest that can be registered on the PPSR in addition to, or as alternative to, the licence.


Owners and licensors should consider the following issues when dealing with IP in the context of the PPSA:

  • Prohibition on granting a security interest: Licensors (and IP owners) should ensure that the licence agreement prohibits the licensee from granting a security interest in relation to the licensed IP. A breach of this obligation could be grounds for termination, and consideration should be paid as to whether the breaching party should indemnify the licensor for costs and losses arising as a result of the breach.
  • Reversionary right: Ensure that any assignment of IP is on terms that provide for a transfer back to the licensor after a certain time or on certain conditions and then ensure that the licensor's reversionary right is registered on the PPSR.\
  • Related IP: If an IP owner intends to give security over personal property that is connected with IP, or has IP integrated within it (e.g. equipment containing embedded software), the IP owner must ensure that they have not already granted a security interest over the relevant IP to another financier.
  • Jointly owned IP: Owners and licensors should thoroughly review any IP joint ownership arrangements to ensure they are adequately protected.
  • IP developed with licensed IP: If a licensor licenses IP that the licensee intends to use for the purpose of developing new IP then the licensor should consider whether it would be appropriate to include a retention of title clause in the licence agreement. Doing so would enable the licensor's security to extend to any IP that is developed through the use of the licensed IP. Failing to do so may inadvertently give rights in that newly developed IP to banks or financiers, for example, who have an "all present and after acquired interest" in the assets of the licensee if the licensee were to become insolvent.
  • Review registrations: Instigate a procedure for regularly reviewing the PPSR for any security interests registered against the licensor or owner to ensure that all registrations are valid.


A licensee may wish to conduct a search of the PPSR for all security interests registered against the licensor (and IP owner if different). A licensee should seek to restrict a licensor's ability to grant a security interest over the IP to a third party because if it does and the licensor becomes insolvent a secured party may exercise its power of sale over the licensed IP. In such circumstances, a licensee will generally not be able to enforce their rights as licensee (and may therefore lose their ability to use the IP) unless the new purchaser has notice of the licence.


Financiers should be aware of the following PPSA related issues when considering advancing credit in situations where IP exists as a means of security:

  • Check for existing registrations: Before taking security interests in IP or IP licences, financiers should check the PPSR to ensure that there are no existing prior security interests.
  • Audit security interests: Financiers should regularly undertake an audit of all security interests they hold over IP and IP licences in New Zealand and elsewhere to ensure that registrations are up to date.
  • Use serial number: If the IP covered by a financier's security interest has a serial number, the serial number should be recorded on the PPSR to enable third parties to adequately identify that financier's secured interest in the collateral.
  • Notification of debtor changes: Financiers should impose a positive obligation on the debtor to notify them of any change in the name or address of the debtor (along with an appropriate indemnity) as a financier's registered security interest may not be valid if the registration does not reflect accurate details of the debtor.


  • Importance of Registration: The PPSA established rules for the creation, priority and enforcement of security interests. It introduced the concept of "perfection" which provides the mechanism to best protect a security interest. Security interests that are perfected take priority over other security interests subject to the specific priority rules in the PPSA. Importantly, because IP is intangible and cannot be perfected by possession, a security interest over IP can only be perfected by registration on the PPSR.
  • Dual Registration: Secured parties should ensure they register their interest on both the PPSR and, where possible, the relevant underlying IP register in all relevant jurisdictions to ensure they get the maximum protections available from both. Some jurisdictions (for example, Australia) offer additional protections to those persons whose interest is registered on an IP register than they would get by registering under the PPSR alone.
  • Competing Priority of Security Interests: The general rule under the PPSA is that the first in time to register their security interest has priority. This is regardless of whether a security interest relates to specific named assets of the debtor or is an "all present and after acquired property" interest. It is common for banks to register an "all present" interest over the assets of a debtor but if a licensor, for example, registers their security interest over specific assets of the debtor before the bank registers its security interest, then the licensor will generally have priority over the bank if the debtor becomes insolvent.
  • Timing of Registration: While a security interest has to be attached for it to be perfected, perfection occurs regardless of the order in which attachment, registration or possession occurs. Accordingly, anyone with a security interest in IP should register that interest on the PPSR as soon as their security agreement comes into effect to ensure they get the best priority available.
  • Conflict of Laws: The territorial nature of IP gives rise to the potential for conflict of law issues. While the PPSA provides that the validity of a security interest is governed by the law of the jurisdiction where the debtor is located when the security interest attaches, conflict of law rules still apply and can give rise to a number of issues where parties are in different jurisdictions and/or the IP is registered in more than one jurisdiction.

Duncan Cotterill can assist you in assessing what intellectual property security interests should be registered, drafting appropriate protections around your intellectual property, searching the PPSR and with the registration of intellectual property rights.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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