The Movable Secured Collateral Law creates a new legal framework that increases access to credit in Costa Rica by broadening the categories of goods that can be pledged and the range of rights over these. Consequently, intangibles – such as intellectual property rights – may be used as collateral for a loan or transaction. This Law also creates a Movable Assets Registry, which consists of data management files accessible to the public, which is supervised by the Movable Assets Division of the National Registry. Creditors with existing pledges over certain types of collateral had until August 20th to migrate to the new system to retain priority over other creditors.
Undeniably, intangibles such as trademarks, patents, trade secrets and copyrights over software or databases can be extremely valuable – although this value may be difficult to quantify. For example, brands are closely linked to the reputation of the company and, presumably, the more famous the brand, the better reputation the company has. In fact, there are companies whose trademarks are estimated to have a higher market value than the company itself. In response to this challenge, other jurisdictions have developed systems to establish valuation parameters so intangible assets may ultimately be used as security. However, there exists no similar legislation in Costa Rica.
Beyond measuring an intangible’s value, additional issues may arise. For example, it is necessary to regulate whether a pledge may be granted over a portion of a trademark, or all similar trademarks within a class, since this may lead to having two owners of the same trademark in the event that the pledge is executed by the creditor – a result which would go against existing laws. Furthermore, in the context of a copyright, the new law should also define what would happen to the moral rights of an author after the author’s death, in the event its economic rights had been previously pledged.
To preempt some of these issues, the contract which will serve as the basis for the guarantee should be carefully drafted and thoroughly describe the intangible asset(s) being pledged.
Additionally, parties must ensure that the intangible asset is registered in Costa Rica, and that the debtor has full authority to pledge existing ownership rights.
We are therefore working with a modern law which aims to increase access to credit and may significantly benefit small business owners by giving them additional sources of credit. However, to ensure the system is effective, additional clarity is needed to address some important gaps that persist today.