This Model Intellectual Property Security Agreement was originally published in The Business Lawyer, Volume 71, Issue 3, Summer 2016. For context and more detailed information on this tool, please see the “Task Force Introductory Report and Background Considerations,” which accompanied its release.
Intellectual Property Security Agreement[1]
[DATE] (the Effective Date[2])
Parties
[DEBTOR NAME], a [JURISDICTION] [ENTITY] (Debtor)
[SECURED PARTY NAME], a [JURISDICTION] [ENTITY] (Secured Party)
Background
Secured Party has agreed to make Loans to Debtor under the Loan Agreement dated the Effective Date between Debtor and Secured Party.
A condition to Secured Party’s obligation to make the Loans is Debtor’s execution and delivery of this Intellectual Property Security Agreement (this Agreement).
Agreement
The parties agree as follows:
1. Security Interest
1.1. Grant and Collateral
To secure Debtor’s performance of its present and future obligations under the Loan Documents (the Secured Obligations), Debtor grants Secured Party a security interest[3] (the Security Interest) in all Debtor’s present and future rights and interest in any:
Copyrights, meaning any United States or foreign[4]:
copyrights, whether registered or unregistered, whether in published or unpublished works of authorship,
copyright registrations or applications in any IP Filing Office,
copyright renewals or extensions, and
rights throughout the world analogous to the foregoing;
Patents, meaning any United States or foreign:
issued patents (whether utility, design, or plant), patent applications, or certificates of invention in any IP Filing Office,
continuations, continuations-in-part, divisions, extensions, reissuances, or reexaminations of a patent or patent application in any IP Filing Office,
inventions described and claimed in any patent or patent application, and
rights throughout the world analogous to the foregoing;
Trademarks, meaning any United States or foreign:
trademarks, service marks, certification marks, trade names, or other types of source identifier, whether arising under a statute or under common law, and whether registered or unregistered,
corporate and company names, business names, trade styles, designs, logos, or trade dress,
the goodwill of the business connected with the use of or symbolized by the trademark or service mark,
any registrations, renewals, applications, and other filings for any trademarks in any IP Filing Office, and
rights throughout the world analogous to the foregoing;
Domain Names, meaning any Internet domain names;
Other Intellectual Property, meaning any intellectual property recognized under or established by the laws of any Jurisdiction other than a Copyright, Patent, Trademark, or Domain Name, whether statutory or common law, registered or unregistered, published or unpublished, including
a mask work (i.e., a layered blueprint of the circuitry in a computer chip as protected under Chapter 9 of Title 17 of the United States Code),[5]
a trade secret or other proprietary or confidential information or data,
rights with respect to software, programming codes, inventions, technical information, procedures, designs, design registrations, know-how, data and databases, processes, models, drawings, plans, specifications, and records, and
rights of publicity and privacy with respect to natural persons;
IP Licenses, meaning any agreements, whether or not styled as a “license,”
that grant a Person an exclusive or nonexclusive license or other right to use or exercise rights in Intellectual Property other than software to the extent the software constitutes “goods” under section 9-102(a) of the U.C.C.,[6] or
that obligate a Person to refrain from using or enforcing any Intellectual Property, including settlements, consents-to-use, non-assertion agreements, and covenants-not-to-sue;
IP-Related Rights, meaning, for any Copyright, Patent, Trademark, Domain Name, Other Intellectual Property, or IP License, any
rights to royalties, revenues, income, or other payments arising therefrom,
rights with respect to claims described at any time on Schedule K, and
all other accrued and unaccrued causes of action (whether in contract, tort, or otherwise) or rights to claim, sue or collect damages for, or enjoin or obtain other legal or equitable relief for, an infringement, misuse, misappropriation, dilution, violation, unfair competition, or other impairment (whether past, present, or future) thereof, including expired items;[7]
Associated Property,[8] meaning any
accounts, deposit accounts, general intangibles, instruments, investment property, or other personal property at any time constituting, evidencing, or arising under or with respect to Intellectual Property (as defined below) or IP Licenses,
commercial tort claims related to Intellectual Property or IP Licenses and described in this Agreement or another record authenticated by Debtor as required by U.C.C. Article 9,
books, records, information, and data with respect to Intellectual Property or IP Licenses, and
substitutions and replacements for any such property; and
Proceeds of any of the foregoing, meaning
“proceeds,” as defined in Article 9 of the U.C.C., and
additional or replacement collateral provided during, or payment or property received in, an Insolvency Proceeding on account of any “secured claim” (within the meaning of section 506(a) of the Bankruptcy Code or similar Bankruptcy Law).
Copyrights, Patents, Trademarks, Domain Names, and Other Intellectual Property are, collectively, Intellectual Property. All Intellectual Property, IP Licenses, IP-Related Rights, Associated Property, and Proceeds subject to the Security Interest and not excluded under the following section 1.2 are the Collateral.
1.2. Excluded Property
Notwithstanding anything to the contrary in this Agreement, the following rights and property (Excluded Property) are excluded from the Collateral to the extent set forth in this section 1.2:
1.2.1. Scheduled Excluded Property
Any right or property identified on Schedule A, “Scheduled Excluded Property.”[9]
1.2.2. Trademark Intent-to-Use Applications
A Trademark application filed in the PTO on the basis of Debtor’s intent to use the Trademark before evidence of use of the Trademark has been filed with and accepted by the PTO pursuant to the Lanham Act (15 U.S.C. § 1051 et seq.), but only for so long as granting a security interest in the Trademark application before the filing of evidence of use of the Trademark would adversely affect the enforceability or validity of the Trademark application or the resulting Trademark registration.[10]
1.2.3. Restricted IP Licenses
Debtor’s rights under an IP License that is subject to or contains a Restrictive Provision that is effective against Debtor despite sections 9-406 through 9-409 of the U.C.C. or other applicable law, but only for so long as the Restrictive Provision is effective and enforceable.[11] Debtor’s rights under any IP License treated as Excluded Property under this section 1.2.3 will constitute Collateral if the Restrictive Provision is not effective and enforceable.
1.2.4. Absence of Conditions
The Security Interest will immediately attach to any item of property treated as Excluded Property under section 1.2.2 or 1.2.3 to the extent that the conditions in that section cease to exist or cease to apply to that item.
1.3. Perfection and Priority
1.3.1. U.C.C. Filing Offices
Debtor authorizes Secured Party to file U.C.C. financing statements for any Collateral in such filing offices as Secured Party reasonably deems advisable to perfect or protect the Security Interest. Debtor ratifies and confirms Secured Party’s authorization to file any such U.C.C. financing statements before the Effective Date.
1.3.2. IP Filing Offices
For any IP Collateral that is the subject of a registration or application in an IP Filing Office, Debtor will, at Secured Party’s request, execute and deliver to Secured Party an IP Security Document, which Secured Party may file in the IP Filing Office.[12]
1.3.3. Perfection and Priority[13]
Debtor represents and warrants to Secured Party that:
The Security Interest in each Copyright that is the subject of a registration or application in the Copyright Office will be perfected upon the filing of an IP Security Document in the Copyright Office.[14]
The Security Interest in all other Collateral will be perfected upon
the filing of a U.C.C. financing statement with the information required by U.C.C. § 9-502(a) in the applicable U.C.C. filing offices listed on Schedule I,
for each Patent issued by or pending in the PTO, the filing of an IP Security Document in the PTO, and
for each Trademark registered or pending in the PTO, the filing of an IP Security Document in the PTO.[15]
For each item of Collateral, the Security Interest thus perfected will have priority over a competing security interest in the item if
when such U.C.C. financing statement is filed, there is no effective filed financing statement for the competing security interest,
for such Copyrights, the IP Security Document is recorded in the Copyright Office within one month after the Security Interest attaches and the competing security interest is not recorded in the Copyright Office before the end of that one-month period, and
for such Patents and Trademarks, the IP Security Document is recorded in the PTO within three months after the Security Interest attaches and the competing security interest is not recorded in the PTO before the end of that three-month period.[16]
1.4. After-acquired Collateral[17]
1.4.1. Notice of After-acquired Collateral; Addenda
Debtor will notify Secured Party of each acquisition after the Effective Date of an interest in
a registered or applied-for Copyright, Patent, Trademark, or Domain Name, or
an IP License of a type required to be listed on a Schedule on the Effective Date.
Debtor will provide the notice by the 10th Business Day following the end of the calendar quarter in which the interest was acquired, along with addenda to Schedules B through G (each an Addendum), as appropriate, listing the acquired interests.[18] Each Addendum will become part of the relevant Schedule effective upon Secured Party’s receipt of the Addendum.[19]
1.4.2. Secured Party’s Right to Provide Addenda
Without limiting Debtor’s obligations, Secured Party may at any time unilaterally provide an Addendum to any of Schedules B through G, as appropriate, to include any such after-acquired Collateral, whether or not Debtor has notified Secured Party of its acquisition. Each such Addendum will become a part of the relevant Schedule effective upon Secured Party’s sending a copy of the Addendum to Debtor. Debtor’s or Secured Party’s failure to provide an Addendum will not limit or detract from the Security Interest in the after-acquired Collateral or other Collateral.
1.4.3. IP Security Documents
With each Addendum delivered to Secured Party, Debtor will also deliver (unless previously delivered under the following section 1.4.4) executed IP Security Documents for the Intellectual Property listed on the Addendum, which Secured Party may file with the applicable IP Filing Office.[20]
1.4.4. Notice of Copyright Applications
Debtor will notify Secured Party at least 10 Business Days before Debtor files an application to register Copyright Collateral with the Copyright Office.[21] The notice will include the title of the copyrighted work as it will appear on the application and the date the application will be filed. Prior to filing, Debtor will execute and deliver to Secured Party any IP Security Documents that Secured Party reasonably requests to maintain the perfection and priority of the Security Interest in the Copyright. At Secured Party’s request, Debtor will file such lien documents in the Copyright Office concurrently with filing the application, and provide Secured Party with copies of the filed copyright application and lien documents.[22]
1.4.5. Commercial Tort Claims
Debtor will promptly notify Secured Party of any commercial tort claim with respect to any Collateral in a signed writing that gives brief details of the claim and grants Secured Party a security interest in the claim and any proceeds, all upon the terms of this Agreement.[23]
1.5. Further Assurances
Upon Secured Party’s request, Debtor will promptly and duly execute and deliver such further instruments and documents and take such further actions as Secured Party reasonably deems appropriate to obtain the full benefits of this Agreement, including
using reasonable efforts to obtain third-party consents and approvals for Debtor to grant a security interest in any item of Collateral to Secured Party, or for Secured Party to enforce the Security Interest or exercise other rights and remedies under this Agreement,[24] and
filing or cooperating with Secured Party in filing forms or other documents in connection with the perfection, protection, priority, or enforcement of the Security Interest, the termination or release of ineffective filings, and the recording of documents to cover missing steps in the chain of title.
2. Representations and Warranties
Except to the extent otherwise set forth on the relevant Schedule, Debtor represents and warrants to Secured Party that on the Effective Date, on the date each Loan is made to Debtor, and, for any Collateral added by an Addendum, the date the Addendum becomes part of the relevant Schedule[25]:
2.1. The Collateral[26]
2.1.1. Copyrights
Schedule B lists all of Debtor’s subsisting[27]
Copyrights that are registered, or are the subject of pending applications, in any IP Filing Office,[28] and
Copyright Licenses-In.[29]
Each Copyright listed on Schedule B is valid and enforceable.[30]
2.1.2. Patents
Schedule C lists all of Debtor’s subsisting
issued Patents, and Patent applications[31] pending, in any IP Filing Office, and
Patent Licenses-In.
Each issued Patent listed on Schedule C is
valid and enforceable, and
not subject to any overdue IP Filing Office fees.
Each Patent application listed on Schedule C is subsisting, and Debtor has no knowledge of any circumstances that might prevent the issuance of a valid Patent in due course.
2.1.3. Trademarks
Schedule D lists all of Debtor’s subsisting
registered Trademarks, and Trademark applications pending, in any IP Filing Office,
material unregistered Trademarks, and
Trademark Licenses-In.
Each Trademark registration and material unregistered Trademark listed on Schedule D
is valid and enforceable,[32] and does not relate to a mark that has been abandoned, and
is not subject to any overdue IP Filing Office fees.
Debtor has no knowledge of any circumstances that might prevent the valid registration of any Trademark for which a Trademark application is listed on Schedule D.
Debtor has notified Secured Party of all circumstances known to Debtor that could reasonably be expected to lead to the invalidity or unenforceability of a Trademark listed on Schedule D, including Debtor’s failure to use the mark or to enforce it against material unauthorized uses by third parties.
2.1.4. Domain Names and IP Licenses
Schedule E lists each of Debtor’s subsisting Domain Names, its registrant, and its next renewal date.[33]
Schedule F lists Debtor’s subsisting Licenses-Out of Intellectual Property Collateral.[34]
Each IP License and Domain Name Contract listed on any Schedule to this Agreement is in full force and effect and constitutes a valid and enforceable obligation of Debtor and, to Debtor’s knowledge, each other party thereto, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditor’s rights generally, and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
No further consent of any party to any such IP License or Domain Name Contract is required in connection with the execution, delivery, and performance of this Agreement.
No further consent or authorization of, filing with, or other act by or in respect of any Governmental Authority is required in connection with the execution, delivery, performance, validity, or enforceability of any such IP License or Domain Name Contract by or against any party thereto.
Neither Debtor nor, to Debtor’s knowledge, any other party to any such IP License or Domain Name Contract is in default in the performance or observance of any of its terms.
Debtor’s rights under each such IP License or Domain Name Contract are not subject to any defense, offset, counterclaim, or other claim [that could reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on the value of the Collateral taken as a whole].[35]
2.1.5. Other Intellectual Property
Schedule G lists all of Debtor’s material Other Intellectual Property that is not listed on any of Schedules B through F and is not confidential.
2.1.6. Ownership
Debtor is the sole legal and equitable owner of, and has good title to, the Collateral, free and clear of any Lien, other than
Liens permitted under the Loan Agreement,
Liens permitted by Secured Party’s express prior written consent, or
Permitted Licenses
(each a Permitted Lien).[36]
Debtor is the record owner of all Collateral that is registered, or for which an application is pending, in any IP Filing Office, and there are no gaps in the chain of title to such Collateral.[37]
No IP License materially adversely affects Debtor’s rights to conduct its business as currently conducted.
No third party has a contractual right to require Debtor to Transfer[38] any Collateral, except to renew Permitted Licenses.
Debtor has not Transferred or agreed to Transfer any Collateral listed on Schedules B–G except in a Transfer that is
expressly permitted by the Loan Documents,
permitted by Secured Party’s express prior written consent, or
a Permitted License[39]
(each a Permitted Transfer).
2.1.7. Restrictive Provisions
Schedule H lists all of Debtor’s Intellectual Property and IP Licenses (including Excluded Property) that are both
listed on any of Schedules A through G, and
subject to or contain a Restrictive Provision.[40]
2.1.8. Existing or Threatened Claims; Infringement
Except as described on Schedule K,[41]
No claim is pending or has been made or, to Debtor’s knowledge, threatened, including via an invitation to license, by any Person (other than by an IP Filing Office examiner in the ordinary course of prosecution of applications) asserting that any Intellectual Property Collateral is wholly or partly invalid or unenforceable, or that any such Collateral or the conduct of Debtor’s business infringes, dilutes, misappropriates, or otherwise violates the rights of any Person.[42]
To Debtor’s knowledge, neither the use of the Collateral by Debtor or its licensees, nor the conduct of Debtor’s business, infringes, dilutes, mis-appropriates, or otherwise violates any Intellectual Property owned or controlled by any Person.
To Debtor’s knowledge, no Person is infringing, diluting, misappropriating, or otherwise violating any of Debtor’s rights in the Collateral, and Debtor has not made any such claim that has not been resolved.[43]
2.1.9. IP Notices
Debtor uses proper notices of Copyright proprietorship in connection with publication of its Copyrighted works and proper statutory notices in connection with its use of its issued Patents and registered Trademarks.[44]
2.1.10. Standards of Quality
Debtor uses consistent standards of quality in all products manufactured, distributed, and sold, and in the performance of services provided, in connection with the Trademark Collateral, and
Debtor has taken all action necessary to ensure that all licensees of Debtor’s Trademarks adhere to Debtor’s established standards of quality for the goods and services provided by the licensee using the licensed Trademark.[45]
2.1.11. Proprietary Software
For each of Debtor’s proprietary software programs included in the Collateral:
Each of Debtor’s current and former employees, officers, contractors, and consultants who has developed, contributed to, modified, or improved such program either performed such work as a “work for hire” or has assigned to Debtor all of such Person’s interest in such programs.
There are no material defects or malfunctions in the program that have not been corrected, and the program operates in accordance with its specifications in all material respects.
The program does not contain any device or feature designed to disrupt, disable, or otherwise impair the functioning of any software program.
To Debtor’s knowledge, there has been no unauthorized access to the program or to any of Debtor’s proprietary databases.
Except as otherwise provided in this Agreement, Debtor has not delivered, licensed, or made available, and has no obligation (present, contingent, or otherwise) to deliver, license, or make available the program’s source code to any escrow agent or other Person other than Debtor’s current employees for the performance of their duties to Debtor.[46]
The program is not subject to any open source, free software, or other license terms and conditions that would require Debtor to disclose any source code or license the program, the code, or any modifications to a third party.[47]
2.1.12. No Government Funding
Debtor has not received funding from any governmental entity or any academic funding that was used in the development of the Collateral.[48]
2.2. Debtor
2.2.1. Existence; Power; Authority
Debtor is validly existing and has the corporate (or other organizational) power and capacity to enter into, and perform all of its obligations under, this Agreement. Debtor’s execution and delivery of, and performance of its obligations under, this Agreement have been duly authorized by all necessary action by or on behalf of Debtor.
2.2.2. Debtor Information[49]
Schedule J sets forth
if Debtor is a corporation, limited liability company, limited partnership, corporate trust, or other registered organization, (i) the Jurisdiction under whose law Debtor is organized, and (ii) Debtor’s name as shown in its public organic record in that Jurisdiction.
if Debtor is an individual, (i) the State and address of Debtor’s primary residence and (ii) Debtor’s name as shown on an unexpired driver’s license issued by that State.
the address of Debtor’s chief executive office and, if different, its principal place of business,
the addresses where Debtor’s records concerning the Collateral are maintained, and
Debtor’s taxpayer identification number, if any.
3. Covenants
3.1. No Transfers of Collateral
Debtor will not Transfer[50] any Collateral except in a Permitted Transfer.[51]
3.2. No Liens on Collateral
Debtor will not create and will take any action necessary to remove any Lien on the Collateral other than a Permitted Lien.[52]
3.3. No Restrictive Provisions
Debtor will not enter into any IP License-In after the Effective Date that contains a Restrictive Provision.[53]
3.4. Registration of Copyrights and Trademarks; Pursuit of Patents
To the extent not already registered or the subject of a pending application, Debtor will promptly register all material Copyright and Trademark Collateral with the applicable IP Filing Office, and will pursue Patents on all material patentable inventions, in each case except to the extent that Debtor reasonably determines that the costs or risks of such action would materially outweigh the probable benefits.[54]
3.5. Recording of Assignments and IP Licenses
Within 30 days after obtaining a written assignment of a registered or applied-for Copyright, Patent, or Trademark from any Person, Debtor will record the assignment in the applicable IP Filing Office. Within 30 days after obtaining an IP License for which recordation will give third parties constructive notice of Debtor’s interest, Debtor will record the IP License in the applicable IP Filing Office.[55]
3.6. Protection of Collateral
3.6.1. Compliance with Law
Debtor will comply in all material respects with all United States laws and regulations applicable to any Collateral.
3.6.2. General
With respect to Collateral that is necessary to the conduct of Debtor’s business as currently conducted, Debtor will take all reasonable steps to
maintain the registrations of all such registered Collateral in full force and effect,
prosecute any pending applications for registration of such Collateral, and
prevent any such Collateral from being abandoned, forfeited, or dedicated to the public.[56]
Such steps may include:
taking actions in, or filing responses to office actions issued by, an IP Filing Office, court, or Governmental Authority,
paying when due all maintenance and other required fees,
filing timely applications for renewal or extension,
filing affidavits or declarations of use under sections 8 and 15 of the Lanham Act, and
filing divisional, continuation, continuation-in-part, or reissue applications for Patents.
3.6.3. IP Notices
Debtor will use proper notices of copyright proprietorship in connection with publication of its Copyrighted works, and proper statutory notices in connection with its use of its registered Trademarks and issued Patents.[57]
3.6.4. Trademark Quality Control
Debtor will maintain the standards of quality of all products manufactured, distributed, and sold, and in the performance of services provided, in connection with Trademark Collateral at a level at least as high as on the Effective Date.[58]
Debtor will take all action necessary to ensure that all licensees of its Trademarks adhere to Debtor’s then-established standards of quality for the goods and services provided by the licensee using the licensed Trademark.[59]
3.6.5. Performance of IP Licenses
Debtor will perform all its material obligations under each IP License to which it is a party.
3.6.6. Protection of Trade Secrets
Debtor will take reasonable measures to protect its material trade secrets, including entering into confidentiality agreements with employees and labeling and restricting access to secret information and documents.[60]
3.6.7. Infringements by Others
Debtor will
promptly notify Secured Party, providing reasonable details, of any Person’s infringement, dilution, misappropriation, or other violation of any Collateral,[61] and
take all reasonable actions to stop such infringement, dilution, misappropriation, or other violation, including seeking damages for or enjoining such conduct.
3.6.8. Challenges and Suits by Others
Debtor will
promptly notify Secured Party, providing reasonable details, of the institution of any proceeding before a Governmental Authority regarding the validity or enforceability of, or Debtor’s right to register, own, or use, any Intellectual Property Collateral, and of any adverse determination on the merits in any such proceeding (in each case other than non-final “office actions” by IP Filing Office examiners in the ordinary course of prosecution of applications),[62] and
take all reasonable steps to defend its rights in the Intellectual Property Collateral in such proceedings and other interference, reexamination, opposition, cancellation, infringement, dilution, misappropriation, and other proceedings.
3.7. Escrow Agreement
Debtor will enter into a source code escrow agreement with Secured Party by the Effective Date.[63] Debtor will deposit with the escrow agent under the escrow agreement all materials required under the escrow agreement, including the source code for
current versions of Debtor’s proprietary computer software, by the 10th Business Day following the Effective Date, and
each update to such software by the 10th Business Day following public release of the update.[64]
Debtor will not establish source code escrow arrangements with any third party without Secured Party’s prior written consent.
3.8. Change of Debtor Information[65]
Debtor will notify Secured Party 15 days before taking any action that will cause, and will promptly notify Secured Party of any other event that may cause or has caused, any information in Schedule J, “Debtor Information,” to become inaccurate.
3.9. Maintenance of Records; Audit and Inspection
Debtor will maintain appropriate and customary books and records with respect to the Collateral and will permit Secured Party to visit Debtor’s premises to inspect such books and records and any tangible items embodying the Collateral. Such visits and inspections will be made during regular business hours with reasonable advance notice, except that notice will not be required while an Event of Defau
