Search Logic & Noise Words: How to Proceed when Making Changes Ben Ark, National Corporate Research, Ltd. Wally Boggus, Capitol Services, Inc. Darrell Pierce, Dykema Gossett PLLC/NPRRA #IACA14

Search Logic Policy Issues Circa 1994, IACA and Filing Project investigated possible search logics Cost was a huge issue It would be so much easier if we could only get filers to get the debtor name right! Strict Search Logic Prevailed But there “had” to be some “wiggle room”, so “noise words” and “The” to be “disregarded” But based on old paradigm Computer does not care about “the” Typos in noise words and “the” mean they are NOT disregarded #IACA14

Special Characters: Ä, ñ, æ, é, Ф, Я, etc MARs: 202 As used herein, the term “legible” is not limited to refer only to written expressions on paper: it requires a machine-readable transmission for electronic transmissions and an otherwise readily decipherable transmission in other cases. Rule begged the question 2007 MARs: Regardless of the method of delivery, information in UCC records may be communicated to the filing office only in the form of characters that are included in [the American Standard Code for Information Interchange character set, as more particularly described in ISO and ANSI-X (R1997)]. #IACA14

Special Characters: Ä, ñ, æ, é, Ф, Я, etc MARs: If a UCC record is tendered that provides characters not permitted under rule on a paper-based form, and the filing office nevertheless accepts the form for filing, the filing office will substitute, for each such character, the character “[*]” in its information management system. Problem with “no substitution” rule: Filer cannot “provide” debtor name as it is under 9-503, as filer is forced to use substitute characters Technically, rule does not work either because debtor’s “correct name” cannot be searched #IACA14

Search Logic Name Normalization 1.Case-insensitive (A = a) 2.Ampersand (&) turned into AND 3.Punctuation removed 4.“Accents disregarded” Accent-insensitive OR accented-chars removed? Topic of previous IACA work groups 5.Noise endings disregarded 1.Longer to shorter (National Bank before Bank) 2.Repeat until none are removed 6.Beginning “THE” removed 7.Spaces removed #IACA14

Search Logic – Individual Names Individual names have additional special rules for handling initials for first and additional (middle) names First and additional initials equivalent to names starting with those initials Search = John Aaron Smith Surname = Smith First = John or J Additional = Aaron or A or no name Results may include John Aaron Smith John A Smith J A Smith John Smith J Smith #IACA14

Search Logic – Individual Names Search = J A Smith Results may include John Aaron Smith John A Smith J A Smith John Allen Smith Jonathon Aaron Smith Josh A Smith J Smith John Smith Josh Smith #IACA14

Adding Special Characters 2013 MARS says to disregard accents Should you transliterate them into base A-Z characters? É  E, ñ  n,  AE Should you treat them as a wildcard? This was the subject of previous STS panels Recommendation was to be consistent and publish how you are handling special characters so your filers and searchers know. #IACA14

Example of Normalization Search: The ABC & XYZ Cómpany, Inc. 1.THE ABC & XYZ CÓMPANY, INC. Make it all uppercase 2.THE ABC AND XYZ CÓMPANY, INC. Replace & with AND 3.THE ABC AND XYZ CÓMPANY INC Remove punctuation 4.THE ABC AND XYZ COMPANY INC Disregard accents; assuming that we’re transliterating 5.THE ABC AND XYZ COMPANY Remove INC noise word ending 6.THE ABC AND XYZ Remove COMPANY noise word ending 7.ABC AND XYZ Removing leading THE 8.ABCANDXYZ Remove any spaces #IACA14

A Fun Example Search: The Corporation Company, As Trustee 1.THE CORPORATION COMPANY, AS TRUSTEE Make all uppercase 2.THE CORPORATION COMPANY AS TRUSTEE Remove punctuation 3.THE CORPORATION COMPANY Remove AS TRUSTEE noise word ending 4.THE CORPORATION Remove CORPORATION noise word ending 5.THE Remove leading THE 6.Nothing If you do a partial match search, you may just return EVERYTHING! #IACA14

Search Logic Change Management Without regard to policy questions, any change to database or standard search logic that affects outcomes can create legal problems Expansion: E.g., nickname table, adding “noise” words, alternative spelling equivalents Causes financing statements that were not legally effective to become effective under 9-506: Effective as of when – change date or initial filing date? Conundrum: statute says initial filing date but makes sense to treat as debtor add, effective from change date Don’t know how courts will handle #IACA14

Search Logic Change Management Constriction : E.g., eliminating table of “noise” word endings Makes a financing statement that was effective under no longer “findable” in a standard search logic search Conundrum: does this make legally effective filing now ineffective, or does it instead create a hidden lien problem? Don’t know how courts will handle Has there been a “taking” without due process? How can searchers protect themselves – search all name endings? FOOSL View: Strict search logic is preferred, and stable results are more important than the exact rules applied #IACA14

Search Logic Change Management Programming Solution: Existing search logic applies to existing debtor names, and new logic applies only to names filed after change is effective Maintains stability of results for existing financing statements and avoids the “taking” and hidden lien problems Be wary of unintended changes in results Possible issue with multiple (e.g., in-house versus on-line) systems Potential differences based on different software language, differences in database structure, etc.? #IACA14