The Personal Property Securities regime has now been live in Australia for just over a year and a half, having come into force on 30 January 20121. This statutory scheme affects holders of security interests over a range of personal property, including intellectual property (IP). This regime harmonises Commonwealth, State and Territory legislation on security interests by standardising the rules of priority and establishing a National Personal Property Securities Register (PPS Register). The grace period for registration of IP security interests on the PPS Register ends on 30 January 2014. If you hold security interests in IP it’s important to take action now to avoid loss of priority of your rights.
Registrable security interests include fixed and floating charges (including “all asset” security interests), legal and equitable mortgages, security interests in licences of IP (including a security interest in royalties payable under an IP licence), and some agreements including a conditional assignment of IP, such as conditional sales or reversionary assignments.
Previously the holder of a security interest over registered IP (eg. a trade mark registration) had the option of recording that interest with IP Australia. This meant the holder of the security interest received notice of any dealings (eg. an attempt by the owner to transfer the registered IP to another party, or the recordal of a further security interest against the registered IP) by the trade mark owner and the registered owner’s dealings with the registered IP were subject to that recorded interest. Importantly, registration of the security interest also previously preserved the priority of that right against a bona fide purchaser for value without notice, and in any case where the security interest had been recorded on the relevant IP Register, no purchaser could be “without notice”. Because of this, recording the security interests on the IP Register alone was generally sufficient to avoid adverse dealings with the registered IP.
Under the new PPS regime, priority is solely determined on the basis of registration of security interests on the PPS Register. This means that security interests over registrable IP now need to be separately recorded on the PPS Register. Registration of a security interest in IP on the PPS Register ensures that the encumbrance will be binding on assignees, and the PPS regime requires parties enforcing security interests to give notice to other secured parties in certain circumstances.
The Registrar administering the PPS Register will not inform holders of security interests of dealings with those interests (such as assignments, licences or subsequent security interests being recorded in relation to the IP). As a result, if you hold a security interest over any registered IP or an “all assets” security over assets including registered IP, and you also want to receive separate notice of the IP owner’s dealings with registered IP, you will still need to record that interest with IP Australia on the relevant register (eg. the Register of Trade Marks, Patents or Designs). IP Australia will not pass this information on to the PPS Register, so you need to separately register your interest with both IP Australia and on the PPS Register.
If you hold an existing security interest in IP which has been registered on the relevant IP Register, you must re-register your security interest on the PPS Register by the end of the 2 year grace period, namely, 30 January 2014. If this remedial step is not taken, you will lose your priority over subsequent secured interests even where the party holding the later security has notice of your interest.
Of course, you should also register any security interests in IP which haven’t already been registered on the relevant IP Register on the PPS Register, including fixed/floating charges (or “all assets” security interests) over assets including registered IP, or interests under agreements incorporating conditional or reversionary IP assignments.
If you hold security interests in IP registrations, including fixed/floating charges (or “all assets” security interests) over assets including registered IP, or are party to agreements incorporating conditional or reversionary IP assignments, you should review these interests to determine whether PPS registration is required and conduct further searches to determine whether any security interests on IP Registers need to be registered on the PPS Register.