Resolving Priority Disputes in Intellectual Property Collateral

Although a goodly amount of recent commentary provides guidance to practitioners on the pitfalls of perfecting a security interest in intellectual property collateral, and another body of work has undertaken the laudable task of proposing reform in the area, no comprehensive attempt has yet been made to help judges resolve the complex priority disputes that arise under existing law. In light of the increased use of intellectual property as collateral and the concomitant rise in litigation, guidance on the resolution of priority disputes in intellectual property collateral is sorely needed. For example, recent cases find Article 9 of the Uniform Commercial Code (U.C.C.) to be broadly preempted by federal intellectual property law and create significant differences between the way copyright and patent priority disputes are addressed, without providing a detailed analysis of the Supreme Court\u27s most recent pronouncement on intellectual property preemption. This Article criticizes these and other cases, provides guidelines for resolving the puzzling priority disputes that arise when intellectual property is taken as collateral, and clearly defines the proper contours of federal preemption. Part I of the Article will review well-established preemption principles, determine whether federal or state rules of decision apply to familiar patterns of dispute involving copyright collateral, and suggest the appropriate result in each case. The conclusions contradict recent academic and judicial discussion of the preemption issue that suggests an inappropriately broad preemptive scope for federal law. The key is not to examine preemption questions in the abstract, but to identify the precise disputes that federal law settles and leave for state law the disputes for which federal law provides no answer. Part II applies the same method of analysis to priority disputes involving patents as collateral and examines whether the current disparate treatment of patents and copyrights is warranted. To round out the discussion, Part III evaluates the effect of the Lanham Act on disputes over security interests taken in trademarks