The general principle is that security granted on tangible
property also charges the property's accessories. That is not
the case however when intellectual property ("IP") rights
belonging to a third party attach to inventory1. For
such rights are not considered to be accessories and thus are not
charged by the security, unless the holder of the IP rights has
otherwise agreed.
If the grantor of the security goes bankrupt, enforcement of the
creditor's security could thus be compromised because of the
third-party IP rights.
Patents
Close attention must be paid to the contract between the grantor
of the security and the holder of the IP rights, as it may contain
significant restrictions on assignability and the enforceability of
security on patented merchandise and equipment. The enforcement of
a hypothec on patented merchandise could be compromised or
contested, notwithstanding the provisions of the Bankruptcy and
Insolvency Act.
