Review advises against use of trademarks as security deposits

Norway

A new review has recently considered the issue of using IP rights as security deposits.

Astri M Lund, partner at Advokatfirmaet Grette DA, was commissioned by the Royal Norwegian Ministry of Justice to consider whether the creation of separate security interests in IP rights should be allowed. She was also asked to draft a proposal for legislation that would cover at least the rights that may be registered in an IP register.

At present, security interests may be created only in IP rights which form part of the equipment of a business; only all of the equipment of a business may be used as security, not individual assets. The mandate from the Ministry of Justice referred to the arrival in recent years of many types of businesses the principal assets of which consist of intellectual property; the ministry stated that there is a need to examine whether the legislation relating to secured transactions may be adjusted in a manner that is better suited for these enterprises. This concerns, for instance, businesses dealing with computer programming and the biotech industry, as well as other industries that are in the business of developing technology. The report was delivered to the Norwegian Ministry of Justice on December 12 2011.

The availability of a separate security interest in trademarks depends on the ability to identify the trademark in order to register the security interest. Certain trademarks might not be registered due to the fact that they cannot be represented graphically in an adequate manner. The scope of protection of unregistered trademarks (as well as other uncertainties surrounding such marks) means that these marks are less preferable for the creation of separate security interests.

In addition, the relationship between different trademarks makes it difficult to create security in unregistered trademarks. The relationship between unregistered trademarks and other tangible property of the trademark owner is of importance when evaluating the creation of separate security in trademarks.

Based on the nature of unregistered trademarks, the review recommended that the Norwegian legislature should not allow the creation of separate security interests in unregistered IP rights.

The review also states that using registered trademarks as security creates less certainty and predictability for the creditor than, for example, patents. The possibility to register new and confusingly similar trademarks was an important factor in this respect. In any agreement regarding the use of a trademark as security, it is important to regulate the relationship between the trademark deposited as security and the trademark owner’s other existing or new trademarks in order to avoid uncertainty as to the value of the trademark security.

Although the review does not support the creation of separate security interests in registered trademarks, it does suggest how the creation of a separate security interest in a registered trademark might be achieved. However, it remains to be seen whether the Norwegian legislator will allow the creation of separate security interests in trademarks.

Felix Reimers and Thomas Hagen, Advokatfirmaet Grette DA, Oslo

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