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Securitization of Intellectual Property

Problem:

In house intellectual property counsel needed assistance in structuring and negotiations to protect confidential data notwithstanding the proposed public securitization of our client’s payments for intellectual property licenses. The payment stream arose under a complex set of cross licenses of intellectual property in a joint research and development agreement.

In order to enhance marketability and liquidity of the securitization, a letter of credit bank providing credit enhancement was to be granted a security interest in the development agreement and cross licenses.

The client wished to enforce provisions of the cross licenses to prevent disclosure of related confidential proprietary research information in the event of financial problems of the securitizing licensor but did not want to block this financing by its research associate. The client did not want a purchaser at foreclosure by the credit enhancement bank to obtain access to the confidential data.

Solvency:

We reviewed the existing cross licenses, the draft private placement memoranda, shaped the final terms of license amendment and used choice of law governing the securitization entity to maximize enforceability of confidentiality, notwithstanding provisions in revised Article 9 of the Uniform Commercial Code purporting to avoid limits on enforceability of security interests in intellectual property.

Read an article by Mark Jr. published in March 2005 in the American Bankruptcy Institute Journal, “Enforceability of Limitations on Security Interests in Intellectual Property Licenses.”