Intellectual Property as Collateral in Secured Transactions : Collision of Divergent Approaches

Until recently, commercial lending was a resource only for companies that had significant tangible assets and historic accounts receivable. Borrowers traditionally pledged tangible assets and accounts receivable to secure bank loans, and intellectual property was a mere afterthought in the lender's credit analysis. Increasingly, more businesses are finding that their most valuable asset is their intellectual property portfolio. However, in the United Kingdom, and elsewhere, there is a structural uncertainty in the law relating to the use of intellectual property as collateral for the purpose of raising debt based finance. This article considers the evolution of intellectual property as collateral. It examines the significance of the availability of collateral to the lending decision and also considers whether the reluctance of lenders to use intellectual property as collateral is based in unfamiliarity, legal limitations or in the potential difficulties which arise out of the nature of intellectual property