Wednesday 23 June 2010

Securitised trade marks: a quick question

A sudden and somewhat random thought occurred to me yesterday in the course of a conversation with Craig Bailey of Questel Edital.

We understand that the securitisation of trade marks is a convenient means by which lending institutions can protect their position when advancing money to a business which needs to borrow funds. The legal framework for this is known and understood. The question however is this: do lending institutions employ any due diligence or watching routines of their own, to ensure that the integrity or value of a securitised trade mark portfolio is not compromised by subsequent applications by third parties to register similar or conflicting trade marks -- or do they leave it to the borrower? While the latter is the more natural party to discharge the duty of monitoring and protecting securitised interests which it may be using on a daily basis, its failure to do so may weaken the lender's position -- and the borrower may not have enough assets to make it worth suing on a warranty in the event that it fails to keep a proper eye on the securitised rights.

Any thoughts or comments?


Robert Cumming said...

As an IP solicitor with some experience working on banking transactions, my view is that the funder would oblige the owner of the assets to maintain their value and take no action to prejudice this (and could e.g. expressly oblige it to adopt a watching service). Any failure to meet this obligation would entitle the funder to terminate the lending arrangement. This protects the lender but in almost all circumstances both parties want the same outcome i.e. to maintain value in the IP.

Aaron Wood said...

My experience is largely the same as Robert.

Except I know that corporate departments acting for the banks tend to "snaffle" (that's a technical term meaning "take so that the IP department doesn't get to put any time on the clock") the work and never put in a term requiring a watch service.

It also depends on your view of "value" of the trade marks, since they are inherently tied up in the value of the business, whereas a charge over property is difference.