The principal assets of many enterprises doing business primarily on the Internet are in the nature of property categorized under the law as intellectual property—namely copyrights, patents, trademarks, and service marks. These technology-rich enterprises, whether in the start-up phase or well established, are often in need of commercial financing. Traditionally, to establish or maintain a marketshare, a firm offers its tangible and intangible assets to a commercial bank or other financier, who takes an interest in them as security for a loan. These financing transactions, when they involve personal property security, are most commonly governed by Article 9 of the Uniform Commercial Code (U.C.C.). When a preponderance of a firm's assets are comprised of intellectual property, however, Article 9 is not necessarily and exclusively the appropriate governing law. Transactions involving intellectual property as security may implicate, in certain circumstances, the statutes defining and governing parties' rights in intellectual property. One of the fundamental problems that has been identified when intellectual property is involved, however, is that the legal regime governing the use of intellectual property as collateral is unclear and confusing. Whereas Article 9, in outlining the rules for perfecting security interests in personal property collateral, as well as defining priority rights held by a secured party, provides clear and certain rights to all parties to commercial transactions within its reach, intellectual property law fails to address the same concepts as Article 9, offers different timing rules and procedures, and eschews Article 9's terminology. Accordingly, a party seeking to use intellectual property as collateral is caught in the intersection of intellectual property law and Article 9—with very little direction as to which way to turn. This uncertainty takes on greater urgency when the debtor, as owner of the intellectual property, files for bankruptcy protection. Bankruptcy provides an acid test for the efficacy of non-bankruptcy law perfection of security interests; the strength and soundness of non-bankruptcy law interests are scrutinized in bankruptcy. When non-bankruptcy law is not state Article 9 but federal intellectual property law, the vulnerabilities in the attachment, perfection and priority rules may be revealed. Moreover, several important bankruptcy issues beyond the issue of the effectiveness of perfection of security interests in intellectual property are raised in “dot-com” bankruptcies. These include (i) the extent to which the company's intangible assets are included in its bankruptcy estate; (ii) the restrictions, if any, on the post-petition use, sale, or lease of intellectual property; (iii) the increased vulnerability of creditors to trustee claims of stay violations; and (iv) the potentially greater risk of avoidance of pre-petition transfers as preferential. This Article will explore these issues in the context of a hypothetical “dot-com” enterprise.

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