Intellectual property as real security

• Citation: (2018) IPLJ 1
• Pages: 1-23
• Author: Karjiker, S.
• Published date: 24 May 2019
• Date: 24 May 2019

INTELLECTUAL PROPERTY AS

REAL SECURITY

 

Anton Mostert Chair of Int ellectual Property Law, Facult y of Law, Stellenbosch

University

 

At present, there appear s to be a lack of recognition, or appreciat ion, of

intellectual prope rty as asset s on par with other proper ty, such as, corporeal

assets or immovable proper ty. While the value of intellectual pro perty

as potentially valuable assets h as been recognised f rom a commercial

1 In particular,

there is a lack of appreciation for the use of intellect ual property as a form of

      

the enormous comme rcial values attached to some in stances of intellectu al

  

the top three global bra nds in 2017 were APPLE, GOOGLE and MICROS OFT,

valued at US$ 184 billion, US$ 141 billion and US$ 80 billion, respectively.2

These companies should be able to un lock that value by offering their

          

operations or corpor ate acquisitions. Simila rly, the copyright owner of the

  

income from the sales gener ated from her novels. The copyright owner should

be able to offer the copyright in those work s as real securit y (along with the

          

business purpo ses.

Greater recogn ition of intellectual propert y rights as assets ak in to corporeal

     

         

   

is particularly u nderdeveloped in South Africa . As will be illustr ated, there

is no uniform and clear ma nner in which intellect ual propert y rights can be

offered as real secur ity in South Africa. This is not only t he case in relation to

  

1 For example, an enqui ry at the Companies and I ntellectual Proper ty Commission has revea led

that curr ently, on average, there are fewe r than two register ed hypothecation s of registered tra de

marks. Given t he number of registered t rade marks, th is is a shockingly low numbe r.

2 Int erbrand ‘Best Glob al Brands 2017’, available at http://interb rand.com/ best-brands /best-global-

 

from brand s. A brand tends to signif y a reference to the associat ions with a particul ar product,

company or ser vice that potent ially go beyond the f unctions of a tr ade mark, such as i mage, statu s

or style.

1

(2018) IPLJ 1

© Juta and Company (Pty) Ltd

those forms of intellectu al property for which the re are statutor y provisions

for hypothecation. There is a pa rticular concer n in relation to the forms of

intellectual prope rty, namely, copyright or plant breeders’ rights, for which

there are no statut ory provisions for the creation of rights of real security.

To date, there has been almost no academ ic analysis of the legal mechanisms

by which intellectual prope rty may be serve as real securit y in South African

        

in South Africa was t hat written by Nata nia Locke.3 However, as indicated

below, Locke’s article did not address the iss ues in this ar ticle, and it also

predated the Gallo Africa case.4 The pu rpose of this ar ticle is to consider the

legal mechanisms by which secur ity interests i n intellectual prop erty may

be created in South Af rican law, and to identify some of the key associated

theoretical issues.

 

       

property as re al security, namely, those created by stat ute: trade marks,5

patents,6 designs,7 copyrig ht8 and plant breeders’ rights.9 Accordingly, the use

of the term ‘intellectu al property’ must be construed a s being limited to these



While Locke’s article dealt with the issue of the use of intellect ual property

as a form of real securit y, it did so only in general term s. Its focus was on the

commercial aspect s of intellectual proper ty as a form of real secu rity. For

example, the article highl ighted the problems with the valuation of intellectual

property, and the fact th at the value thereof may be inextr icably linked to a

particular business.10 The latter fact is one reason why there may be a very

limited number of buyers for par ticular intellect ual propert y, should it be

realised upon the debtor’s default.11 Intellectual prope rty may also present

peculiar risk s as a form of real securit y: the use of the particu lar intellectual

property may be de pendent on third-par ty licences,12 and the valid ity of the

intellectual property may be challenged.13 Locke’s article merely paraphras ed

3 N Locke ‘The Use of Intel lectual Propert y as Secuirty for Cor porate Debt’ (2004) 16 SA Merc

LJ 716 716. There was also a one-page ar ticle in the Busines s Brief (A Van Rooyen ‘Pledge Your

Intellectual Property?’ Business Brief (Parklands, G auteng, August /September 2 011) 38. The

references to t he possible secur ity rights in intellect ual proper ty in other work s (for example,

    Adams & Ad ams: Practitioner’s Guide to Intelle ctual

Property Law 1 ed (2011) and R Brits Real Securit y Law 1 ed (2016)) are merely made in passi ng,

without any det ailed analysis.

4 Gallo Afri ca Ltd and Others v Stin g Music (Pty) Ltd and Othe rs 2010 (6) SA 329 (SCA).

 

6 Patents Act 57 of 1978.

7 Designs Ac t 195 of 1993.

8 Copyr ight Act 98 of 1978.

9 Plant Breed ers’ Rights Act 15 of 1976.

10 Locke (n3) 718-719.

11 Locke (n3) 720.

12 Locke (n3) 724.

13 Locke (n3)721-722

2 South African Intellectual Property Law Journal (2018) 6

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