Australia: PPSA and IP assets: Registering security interests before it's too late!

The PPSA's two-year transitional period that granted temporary protection to interests in personal property expires on 31 January 2014. After that date, many Australian businesses and the holders of security interests over Australian intellectual property rights will lose the protection they enjoyed during 2012 and 2013.

Background

The Personal Property Securities Act 2009 (Cth) (PPSA) commenced on 30 January 2012. The PPSA replaced more than 70 different registers with a single, national online register. It also did away with the formal requirements previously necessary to create a 'security interest' and instead expanded the term to include retention of title arrangements, bailments and long-term leases or consignments of personal property.

The main purpose of expanding the scope of security interests was to ensure that third parties (such as banks and financiers) were not misled by the apparent ownership of assets in their customers' possession. The PPSA overcomes that risk by requiring all interests in personal property in another's possession (including where ownership is retained) to be perfected by registration on the Personal Property Securities Register (Register).

Who is affected?

The PPSA may impact a variety of businesses including those which:

• have assigned Australian intellectual property (IP) assets with a right of reversion if conditions of that assignment are not fulfilled
• have been granted security over a third party's Australian IP assets (including IP licences), to secure payments or other contractual obligations
• supply goods on credit or retention of title terms
• lease or supply goods on hire purchase terms or consignment.

What interests are protected by the transitional period?

Parties with interests caught by the new regime (known as secured parties) were granted a two-year transitional period to register interests that arose prior to 30 January 2012. During that period, such interests (known as Transitional Security Interests) are granted the same priority as they were afforded in the pre-PPSA environment.

That transitional period ends at midnight on 31 January 2014 (Canberra time).

What impact will this have on Australian businesses?

Many commercial or security arrangements formed before 30 January 2012 will lose their transitional protection if they are not registered on the Register by 31 January 2014, exposing businesses to risks including:

1. Loss of priority in IP assets or other goods against other creditors (even if an agreement was entered into before those of other creditors and regardless of retained ownership of those assets).
2. An unregistered security interest in goods will be ineffective if the party in possession of the owner's goods becomes insolvent. The owner will be regarded as an unsecured creditor and title to the goods may transfer to the insolvent entity.
3. A buyer may be able to buy IP assets or other goods free of the owner's security interest.

Any security interests previously registered on the Australian Patents, Trade Marks or Designs Registers have not been automatically transferred. A new registration will need to be made on the Register in order to maintain priority over any subsequent security interests.

What can be done?

Businesses should seek legal assistance to:

• review their agreements and terms and conditions to determine whether they constitute security interests
• register all security interests on the Register before 31 January 2014.

Prompt review of agreements and attending to registration of Transitional Security Interests on the Register should protect against third party claims.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.