Businesses often assume that a singular security contract covers both intellectual property and physical assets, like a patented manufacturing tool or copyrighted software embedded in hardware. Section 10 of the Borrowers and Lenders Act 2019 debunks this notion, stating that security rights in physical assets do not encompass associated IP, and vice versa. This distinction poses risks for lenders and borrowers who overlook the necessity of dual registration.
Why is adherence to this crucial? Picture a scenario where a company pledges a specialized 3D printer (physical asset) as collateral but relies on proprietary software (IP) for its operation. In case of default, the lender can repossess the printer but lacks entitlement to the software. This disparity could render the collateral useless without the IP, imperiling recovery. Likewise, solely securing IP may not shield a lender if the tangible assets vital for the commercialization are omitted.
Hence, a dual collateral arrangement is imperative. It is essential to have explicit contractual terms separating and securing both IP and physical assets. For example, a client financing agricultural machinery with embedded patented technology would require registration for both the equipment (under movable property regulations) and protecting the IP via registration at the IP Department of the Office of the Administrator and Registrar General.
Moreover, conducting a thorough assessment to identify interlinked assets and ensure comprehensive protection is crucial. For instance, a brewery client utilizing trademark branding on leased brewing equipment must secure distinct interests in the trademark and equipment to avert disputes during enforcement.
Reach out to us today to discover how we can assist you in safeguarding your intellectual property and expanding your business securely in Sierra Leone.
