In Canada, security interests in intangible property
collateral are perfected (or published, in the case of
Québec) by making a registration under the personal property
security legislation ("PPSL") of the province where the
debtor is deemed to be located at the time the security interest
attaches. Intellectual property, such as trade-marks, patents,
industrial designs, or copyrights, whether registered or
unregistered, is not treated any differently than other types of
intangible property collateral in that regard.
However, each of the federal Trade-marks Act,
Patent Act, Industrial Design Act, and
Copyright Act also provide for, or permit, the
"recording" (i.e. registration) at the Canadian Intellectual Property Office (the
"CIPO") of assignments or transfers of the types of
intellectual property to which those statutes apply. None of them
refer specifically to security interests or perfection, and there
is no jurisprudence regarding the legal effect of recording a
security interest with CIPO. Nevertheless, it is conceivable that a
court might someday conclude (contrary to the current generally
accepted view) that the PPSL priority rules do not apply to
intellectual property applications or registrations maintained at
the CIPO as a result of paramount federal legislation, and
according that priority disputes in respect of intellectual
property collateral are to be determined under common law. The
recording at the CIPO of a security interest in registered
intellectual property might then enable a secured party to
demonstrate that notice of its security interest was properly given
to competing secured creditors. Moreover, even outside the context
of a common law priority dispute, a recording at the CIPO might
help avoid potential litigation risk by putting other interested
parties on notice (to the extent such other parties reviewed the
applicable CIPO records).
Therefore, where registered intellectual property constitutes a
significant part of the collateral, secured parties often record at
the CIPO their security interest against the property in question
(in addition to making appropriate filings under applicable PPSL).
The recording process essentially involves the payment to the CIPO
of a prescribed fee, and the filing of a copy of an executed
security agreement (identifying in sufficient detail (including
reference to application numbers or, where applicable, registration
numbers) the intellectual property against which the security is
granted) by the CIPO in the appropriate records. Recording may only
be done after the security agreement is effective, and for
confidentiality reasons secured creditors often prefer to record
only an abridged (but fully executed) version of their
"main" security document.
Charles Zienius advises banks, credit
corporations, and other financial institutions, and a broad range
of corporate borrowers, on the structuring and negotiation of
secured and unsecured debt financing transactions (including
asset-based, syndicated, acquisition, and debtor-in-possession
loans) in both the cross-border and domestic markets.
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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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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