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Pledging of intellectual property rights: an important aspect of lending for pharmaceutical, chemical and biomedical companies

06/06/2019
Pledging of intellectual property rights: an important aspect of lending for pharmaceutical, chemical and biomedical companies
Photo: Tawan Jz/Shutterstock.com

The long-awaited entry into force of the Belgian law of 11 July 2013 on security interests over movable assets on 1 January 2018, which introduces a new title XVII in the Belgian Civil Code (the “Pledge Law”), has affected many areas of the Belgian secured lending landscape, including for businesses with important intellectual property rights. The Pledge Law has significantly simplified the creation, perfection and enforcement of a pledge. In particular, the Pledge Law has put an end to legal uncertainties regarding intangible assets, such as intellectual property rights. Here is what you need to know.

Lex specialis or lex generalis?

The importance for creditors of establishing a security on intellectual property rights is indisputable, especially for pharmaceutical, chemical companies and biomedical companies. This can be explained by the economic importance of these rights - the value of which can often be considerable - in the company’s assets.

Article 7 in fine of the Pledge Law explicitly states that the provisions of the Pledge Law apply to rights of pledge that contain intellectual property rights, as long as they are not incompatible with other provisions in which such rights of pledge are specifically regulated. This is an application of the principle “lex specialis derogat legi generali”.

The provisions of the Pledge Law are considered as governing any pledge agreement. As the Pledge Law acts as a lex generalis, depending on the type of intellectual property right, specific provisions regarding the validity and perfection of a right of pledge may apply. As such, without being exhaustive, the following legislation acts as lex specialis: (i) the Benelux Convention on Intellectual Property, (ii) Regulation (EU) 2017/1001 on the European Union trade mark, (iii) the European Patent Convention and (iv) the Code of Economic Law.

Abolition of the requirement of dispossession

The Belgian legislator has significantly simplified the method of perfecting a pledge over movable assets. In general, there are two alternative methods for achieving perfection under the Pledge Law and making the pledge effective against third parties: either the pledge is registered in the national online Pledge Register or the pledgor transfers possession over the pledged assets to the pledgee (or a third party pledge holder).

Due to their nature and as they differ from other intangible goods, such as receivables, intellectual property rights cannot be the subject of a fictitious dispossession. The legislator has provided a solution to this problem. Article 39 of the Pledge Law itself - which provides for the supplemental perfection method by taking possession of the pledged assets - specifically refers to a pledge on tangible assets (as opposed to intangible assets). Consequently, the only way to make a pledge on intellectual property rights enforceable against third parties, in accordance with the Pledge Law, is to register it in the national online Pledge Register.

Thus, the uncertainty regarding the validity and effect of a right of pledge on intellectual property rights no longer exists since the Pledge Law’s entry into force.

The Pledge Register

While the Pledge Law provides for two methods of achieving a pledge’s perfection (the transfer of possession of tangible assets or registration in the Pledge Register), in practice the possession of intangible assets, such as intellectual property rights, cannot be transferred, and so a pledge over intellectual property rights is enforceable against third parties only by its registration in the national online Pledge Register. The pledgee, or a representative (in its own name and for the account of the pledgee), has the authority to register the pledge without needing the pledgor’s consent.

Depending on the type, a pledge over intellectual property rights may also need to be registered in the relevant intellectual property rights register or be notified to a competent intellectual property rights authority. Such specific registers are (i) the Benelux Office for Intellectual Property (BOIP) in The Hague, the Netherlands, (ii) the European Union Intellectual Property Office (EU IPO) in Alicante, Spain, (iii) the World Intellectual Property Organization (WIPO) in Geneva, Switzerland, (iv) the European Patent Office (EPO) and/or (v) the Belgian Office for Intellectual Property (OPRI).

As the Pledge Law acts as a lex generalis, it is required or at least advisable to opt for a double, simultaneous registration (the national online pledge register and the intellectual property register) to ensure the opposability of a right of pledge over patents, trademarks or designs.

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