How to secure a lien on a patent as a secured creditor

Have you loaned money to a patent holder? Is the patent pledged as Collateral to secure the loan? What steps do you need to take to secure your lien rights in the patents?

  1. Confirm that the potential debtor has the right to put the patent up for collateral or that the lien is legally established. Confirm ownership of the patent and any other interest in the patent that may be senior to your lien.
  2. Create a contract between the patent holder and the lienholder that describes the patent in detail. The Uniform Commercial Code states that security or lien agreements on patents must contain a full description of the patent.
  3. Determine the monetary value of the patent. Consider asking a professional appraiser to provide written documentation that verifies the value.
  4. File a lien notice with the New York Department of State Division of Corporations and United States and Patent Office. Obtaining the assistance of an attorney or an experienced loan professional will help. Filing a lien notice is necessary to “perfect” the security interest of the party accepting the patent as collateral. Failure to file a lien notice with the Division of Corporations can render the lien unsecured and allow others to get an interest senior to your lien.
  5. The U.S. Patent and Trademark Office (USPTO) records any document that affects title. While the U.S. Patent Act does not expressly require recording of security interests, it is a prudent thing to do because Section 261 of the Patent Act states that any assignment or conveyance is void against a subsequent bona fide purchaser or mortgagee unless it is recorded with the USPTO within three months of its date or prior to the subsequent purchase or mortgage.  The purpose is to provide public notice of the interest in the patent that might otherwise be unknown to others. For information on filing a patent lien call the Assignment Division at (571) 272-3350.

Working with a corporate or patent attorney will help you secure the rights you seek in the patent asset. You want to be able to take over the patent if the creditor does not pay and to be able to secure your priority position against future lien holders.

Patents can be sold or licensed to recoup your investment. They can be viable collateral if you take the proper steps to secure your lien.