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US Federal Intellectual Property Due Diligence: Beyond UCC and Lien Searches

By: Despina Shields, COGENCY GLOBAL, on May 24, 2023 4:51:30 AM

UCC Due Diligence

What this is: Like due diligence searches for statutory liens and consensual (UCC) financing statements on borrowers and debtors, being aware of and/or confirming the owner and status of intellectual property in a transaction is critical in the US. 

What this means: As lenders continue to rely on counsel to conduct the most thorough due diligence possible, it is important to be mindful of how federal intellectual property plays into transactions. 

When conducting due diligence searches, do you wonder… 

“Should I be searching the US Patent and Trademark Office (USPTO) and the US Copyright Office (USCO)?”

If intellectual property (IP) is involved in your transaction, then the answer – in most cases – is a resounding yes

An entity that has a well-known trade name, service mark, or logo, strongly distinguished from others in the marketplace, possesses valuable IP that may be of interest to a secured lender. If not a recognised mark, an entity may have patents or registered copyrights adding significant value to its portfolio. This valuable IP may be pledged as collateral to secure a loan. Uncovering information on assignments, liens, and general ownership of that intellectual property with a USPTO patent search, USPTO trademark search and USCO copyright registration search is just as vital as searching for statutory liens and consensual UCCs on borrowers and debtors. 


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Typical UCC/Lien Searches Might Not Be Enough  

Intellectual property falls within the scope of ‘general intangibles’ as defined in Section 9-102 of Article 9 of the Uniform Commercial Code. As such, searching for UCCs that may include IP as collateral is necessary but limiting your due diligence to a typical UCC and statutory lien search may not be enough. A UCC may only provide a general collateral description, which may or may not indicate if IP is included because these specific details are only required in the security agreement. Security agreements are rarely found in the public record. Therefore, a thorough public record due diligence investigation should also include a search of the USPTO and USCO. Only by conducting these additional searches can you determine who has the rights to the IP and whether other liens exist. 

Typically, a  thorough due diligence search strategy includes the following search types and search locations: 
  • State central filing office of the debtor’s state of formation for UCCs. 
  • If the debtor owns land, a search of the local land records for UCC fixture filings and other liens. 
  • State and local level filing offices in the state where the debtor’s chief executive office resides for statutory liens. 
  • State and federal level litigation searches. 
  • USPTO and USCO for intellectual property.
Intellectual property has increasingly become more valuable and more frequently encountered as collateral in financial transactions.  As lenders continue to rely on counsel to conduct thorough due diligence, it is important to be mindful of how intellectual property plays into transactions. Searches of the USPTO and USCO are important pieces of the due diligence puzzle that provide a more detailed view of a debtors’ intellectual property assets – and should not be overlooked.
Have more due diligence questions? Contact our team for assistance. 

This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.


Topics: Intellectual Property Due Diligence