UIC John Marshall Journal of Information Technology & Privacy Law


The rapid development of computer technology has led software companies to seek financial support from various commercial lenders. Lenders are typically unaccustomed and unwilling to lend money on the security of intellectual property. The fear of lenders is well founded because lenders face a considerable risk in lending money on contemporary and intangible collateral. As a result of the unavailability of funds, technology based companies would be hindered in their efforts to promote new programs. The unclarity of laws with respect to obtaining a security interest has created obstacles for parties on both sides of the transaction -- the lender and the borrower. In order to secure a valid security interest, the lender should record the interest based on federal law. The federal method of securing the interest through the United States Copyright Office is favored over the method of filing with the Secretary of State under the Uniform Commercial Code. Relevant case law also supports a federal registration method as well. There are certain caveats with the federal method. For example, a blanket lien is not permitted for after developed property. Also, the provision for the priority rule diminishes lender confidence in ownership searches of intellectual property. Further clarification of current laws and the enactment of new legislation are the means to permanently resolve the problems in perfecting a security interest in copyrights.