1. The University of Chicago
5/21/2019
Class 22 Secured Transactions, Fall, Limits of Article 9: Intellectual Property
Randal C. Picker
James Parker Hall Distinguished Service Professor of Law
The Law School
The University of Chicago
Copyright © Randal C. Picker. All Rights Reserved.

2. 9-109(c) (c) [Extent to which article does not apply.]
5/21/2019
9-109(c)
(c) [Extent to which article does not apply.]
This article does not apply to the extent that:
(1) a statute, regulation, or treaty of the United States preempts this article;
May 21, 2019

3. 9-311 (a) [Security interest subject to other law.]
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9-311
(a) [Security interest subject to other law.]
Except as otherwise provided in subsection (d), the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:
(1) a statute, regulation, or treaty of the United States whose requirements for a security interest’s obtaining priority over the rights of a lien creditor with respect to the property preempt Section 9‑310(a);
May 21, 2019

4. 9-311 Cont. (b) [Compliance with other law.]
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9-311 Cont.
(b) [Compliance with other law.]
Compliance with the requirements of a statute, regulation, or treaty described in subsection (a) for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under this article. …
May 21, 2019

5. Cybernetic Services Stipulated Facts
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Cybernetic Services
Stipulated Facts
Matsco, Inc., and Matsco Financial Corporation (Petitioners) have a security interest in a patent developed by Cybernetic Services, Inc. (Debtor)
Security interest was “properly prepared, executed by the Debtor and timely filed with the Secretary of State of the State of California”
May 21, 2019

6. Cybernetic Services Question
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Cybernetic Services
Petitioners did not record their interest with the PTO.
Question
Is the security interest perfected?
May 21, 2019

7. 5/21/2019
35 USC 261
… An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
May 21, 2019

8. 8‑1: Hypo Hypo Debtor Bank
5/21/2019
TTYN
8‑1: Hypo Hypo
Debtor
35 USC 261: An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
5/1: $
SA: Patent
FS: UCC
Bank
Is Bank perfected?
May 21, 2019

9. 8‑1: Answer This turns on whether filing in UCC records suffices
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8‑1: Answer
This turns on whether filing in UCC records suffices
Cybernetic Services (CA9, 2001) says yes based on its detailed reading of key terms in the Patent Act
May 21, 2019

10. 8‑2: Patently Absurd? Debtor Finco Bank Who has priority? 6/1: $
5/21/2019
TTYN
8‑2: Patently Absurd?
Debtor
Finco
6/1: $
SA: Patent
6/1
Records
Transfer
5/1: $
SA: Patent
FS: UCC
Who has priority?
US PTO
Bank
May 21, 2019

11. 5/21/2019
8‑2: Patently Absurd?
Again, Cybernetic Services suggests that Bank wins
Treats grant of SI as outside of “assignment, grant or conveyance” in 35 USC 261
May 21, 2019

12. 8‑2: Patently Absurd? Debtor Finco Bank Who has priority? 6/1: $
5/21/2019
TTYN
8‑2: Patently Absurd?
Debtor
Finco
6/1: $
Mortgage: Patent
6/1
Records
Transfer
5/1: $
SA: Patent
FS: UCC
US PTO
Bank
Who has priority?
May 21, 2019

13. 8‑2: Patently Absurd? Cybernetic Services doesn’t seem to answer this
5/21/2019
8‑2: Patently Absurd?
Cybernetic Services doesn’t seem to answer this
May 21, 2019

14. 102. Subject matter of copyright: In general
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102. Subject matter of copyright: In general
(a)
Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
May 21, 2019

15. 17 USC 408: Copyright registration in general
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17 USC 408: Copyright registration in general
(a) Registration Permissive.
At any time during the subsistence of the first term of copyright in any published or unpublished work in which the copyright was secured before January 1, 1978, and during the subsistence of any copyright secured on or after that date,
May 21, 2019
Copyright © Randal C. Picker

16. 17 USC 408: Copyright registration in general
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17 USC 408: Copyright registration in general
(a) Registration Permissive.
the owner of copyright or of any exclusive right in the work may obtain registration of the copyright claim by delivering to the Copyright Office the deposit specified by this section, together with the application and fee specified by sections 409 and 708. Such registration is not a condition of copyright protection.
May 21, 2019

17. 17 USC 205: Recordation of transfers and other documents
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17 USC 205: Recordation of transfers and other documents
(a) Conditions for Recordation.
Any transfer of copyright ownership or other document pertaining to a copyright may be recorded in the Copyright Office if the document filed for recordation bears the actual signature of the person who executed it, or if it is accompanied by a sworn or official certification that it is a true copy of the original, signed document.
May 21, 2019

18. 17 USC 205 Cont. (c) Recordation as Constructive Notice.
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17 USC 205 Cont.
(c) Recordation as Constructive Notice.
Recordation of a document in the Copyright Office gives all persons constructive notice of the facts stated in the recorded document, if—
May 21, 2019

19. 5/21/2019
17 USC 205(c) Cont.
(1) the document, or material attached to it, specifically identifies the work to which it pertains so that, after the document is indexed by the Register of Copyrights, it would be revealed by a reasonable search under the title or registration number of the work; and
(2) registration has been made for the work.
May 21, 2019

20. 17 USC 205 Cont. (d) Priority Between Conflicting Transfers.
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17 USC 205 Cont.
(d) Priority Between Conflicting Transfers.
As between two conflicting transfers, the one executed first prevails if it is recorded, in the manner required to give constructive notice under subsection (c), within one month after its execution in the United States or within two months after its execution outside the United States, or at any time before recordation in such manner of the later transfer.
May 21, 2019

21. 5/21/2019
17 USC 205(d) Cont.
Otherwise the later transfer prevails if recorded first in such manner, and if taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, and without notice of the earlier transfer.
May 21, 2019

22. 17 USC 101 A “transfer of copyright ownership” is
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17 USC 101
A “transfer of copyright ownership” is
an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license.
May 21, 2019

23. 8‑3: First-to-file (or Not)? (1/3)
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TTYN
8‑3: First-to-file (or Not)? (1/3)
Debtor
Finco
5/15
SA: Song
Reg. Copy. FS $
5/1
SA: Song
Reg. Copy. FS $
5/15
Records
Transfer
Who has priority?
Copyright
Office
Bank
5/22: Records Transfer
May 21, 2019

24. 8‑3: Answer If under Article 9 If under 17 USC 205
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8‑3: Answer
If under Article 9
Bank filed first, Bank wins
If under 17 USC 205
Bank filed within one month of 5/1 and therefore has priority under 205(d)
Bank wins either way here
May 21, 2019

25. 8‑3: First-to-file (or Not)? (2/3)
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TTYN
8‑3: First-to-file (or Not)? (2/3)
Debtor
5/7: Knowledge
Finco
5/15
SA: Song
Reg. Copy. FS $
5/1
SA: Song
Reg. Copy. FS $
5/15
Records
Transfer
Who has priority?
Copyright
Office
Bank
6/22: Records Transfer
May 21, 2019

26. 8‑3: Answer If under Article 9 If under 17 USC 205
5/21/2019
8‑3: Answer
If under Article 9
Knowledge irrelevant, Bank wins
If under 17 USC 205
Even though Bank is outside one month window, Finco has knowledge; Bank wins under 205(d)
Bank wins under either system here
May 21, 2019

27. 8‑3: First-to-file (or Not)? (3/3)
5/21/2019
TTYN
8‑3: First-to-file (or Not)? (3/3)
Debtor
Finco
5/7: Knowledge
5/15: $, SA: Song
Reg. Copy. FS
5/1
SA: Song
Reg. Copy. FS $
5/15
Records
Transfer
5/20: S, SA: Song
Reg. Copy., FS
Creditco
Who has priority?
Copyright
Office
5/20: Records Transfer
Bank
May 21, 2019
6/22: Records Transfer

28. 8‑3: Answer If under Article 9 Knowledge irrelevant
5/21/2019
8‑3: Answer
If under Article 9
Knowledge irrelevant
Bank beats Finco who beats Creditco
May 21, 2019

29. 8‑3: Answer If under 17 USC 205 Bank beats Finco (knowledge)
5/21/2019
8‑3: Answer
If under 17 USC 205
Bank beats Finco (knowledge)
Finco beats Creditco (executed first and filed within window)
Creditco beats Bank (executed later but Bank filed outside window)
Circular priority
May 21, 2019

30. 8‑3: Answer Which system controls?
5/21/2019
8‑3: Answer
Which system controls?
Aerocon says for registered copyrights, the federal filing controls, while for unregistered copyrights, Article 9 controls
May 21, 2019

31. Filing with the Copyright Office
5/21/2019
Filing with the Copyright Office
The Filing
Security agreement suffices
Indexing
Filings are indexed by title or copyright registration number (205(c)), not the debtor’s name
Requires individual filings for each item claimed
May 21, 2019

32. Filing with the Copyright Office
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Filing with the Copyright Office
Substantially multiplies the number of filing in an initial transaction and offers no good mechanism for after-acquired property
May 21, 2019

33. Buys 1/3 interest in assets and avoidance rights
5/21/2019
Aerocon
Aerocon
WAP/WA/ARS
Pays $90K
Buys 1/3 interest in assets and avoidance rights $
SA: All Assets
FS: Calif SS
Gets 2/3 interest
SV Bank
Airweld
Is Bank perfected?
May 21, 2019

34. How Should We Resolve This Case?
5/21/2019
How Should We Resolve This Case?
Under Current Article 9?
Does It Matter Whether the Copyrighted Works are Registered or Unregistered?
May 21, 2019

35. Start with 17 USC 205 Key Questions
5/21/2019
Start with 17 USC 205
Key Questions
Does the federal statute displace the Article 9 filing requirement?
To what extent are other Article 9 rules displaced by the federal scheme?
May 21, 2019

36. 5/21/2019
Start with 17 USC 205
205(d)
Fed priority rule should be understood to displace Article 9 priority rules, when 205(d) applies
Limited to situations where constructive knowledge given under 205(c)
205(c) in turn applies only to registered works
May 21, 2019

37. Start with 17 USC 205 Implication? Problems?
5/21/2019
Start with 17 USC 205
Implication?
One set of rules for registered works, another for unregistered
File in fed system for registered works, state system for unregistered
Problems?
What happens when unregistered work is registered?
May 21, 2019

38. Switching Status Debtor Finco Bank Who has priority? 5/15: $ SA: Song
5/21/2019
TTYN
Switching Status
Debtor
Finco
5/15: $
SA: Song
5/1: $
SA: Song
Unreg. Work
Files FS w/SS
5/15
Records
Transfer
5/2: Registers work
Copyright
Office
Bank
Who has priority?
May 21, 2019

39. Answer Registration seems to switch applicable law
5/21/2019
Answer
Registration seems to switch applicable law
But note limits in last sentence of 205(d)
Good faith
Without notice of earlier transfer
May 21, 2019

40. How to Deal with this Possibility?
5/21/2019
How to Deal with this Possibility?
Transaction Design?
Insist on registration?
Update with registrations?
May 21, 2019