If you hold security interests in intellectual property (IP), you should be aware of the effects of the Personal Properties Security (PPS) regime and the steps you need to take to protect your security interests. The Personal Property Securities Act 2009 (Cth) (PPSA) commenced in Australia on 30 January 2012 and established a law for the effective creation and enforceability of security interests in personal property, which includes IP.
Previously, there were more than 70 Commonwealth, State and Territory laws in respect of security and related interests, and they were administered by more than 40 registers. The PPSA was designed to replace this complex system in a uniform and consistent manner, nation-wide.
The PPSA provided for a 2 year transitional period from 30 January 2012 (which ends on 30 January 2014) for arrangements which existed prior to 30 January 2012. The PPSA deems a transitional security interest to be perfected for the duration of the transitional period. Given the end date for this transitional period is now approaching, those with security interests in IP need to register these security interests on the PPS Register (PPSR) before 30 January 2014 in order to maintain the priority of those interests. Otherwise, the priority in relation to those security interests may be lost, and other parties who have a competing interest may be given priority over those security interests. Further, if there is an insolvency event relating to the party granting the security interest in the relevant IP, if the security interest is not perfected, then there is a risk that the secured party may lose that security interest.
The PPSA provides for protection of security interests in IP through a procedure of:
- A security interest attaching to the relevant IP;
- A security interest then becoming enforceable against a third party; and
- The security interest being "perfected".
Perfection, in this context, will occur when the security interest has been registered on the PPSR.
The PPSR is the record-keeping system of all personal property security interests under the PPSA. It is a web-based system where registration of, and searches for, security interests can be conducted online.Under the PPS regime, IP Australia's registers (eg patents, trade marks and designs) are no longer the legal registers for recording security interests in IP. All security interests in IP now need to be registered in the PPSR. There was no automatic transfer of security interests on IP Australia's registers to the PPSR. Therefore, it is very important that holders of security interests in IP review their arrangements now to ensure these security interests are correctly registered in the PPSR. Existing notifications of security interests should still be maintained in the IP Australia registers and continue to be notified to those registers in the future, as a secondary measure to ensure that the holder of the security interest is notified of any relevant activity regarding the relevant IP.
Review Your Security Interests Now
With the approaching deadline of 30 January 2014, steps should be taken now to identify your portfolio of security interests in any IP, which might include trade marks, patents, designs, copyright and intellectual property licences (which are personal property over which a security interest may be taken). An audit should then be undertaken to ensure that all IP security interests have been properly recorded in the PPSR and if they have not, that this occurs before the 30 January 2014 deadline.
The PPS regime has much broader application than the IP issues addressed above. In addition to addressing security interests in any IP before the 30 January 2014 deadline, businesses need to be aware of the full effects of the PPS regime relevant to their own circumstances.