On July 1, 2001, revised Article 9 of the Uniform Commercial Code ("Revised Article 9") went into effect in California, governing every aspect of the creation, attachment, and perfection of security interests in personal property and fixtures. It is the product of a multi-year effort conducted under the auspices of the American Law Institute and the National Conference of Commissioners on Uniform State Laws.
Revised Article 9 makes significant changes:
It makes a notable "upgrade" for the 21st century in its recognition of technological developments. Specific provisions address the collateral classification of stand-alone software, embedded software, intellectual property licenses, and other tangible and intangible technology and IP assets.
It affects licensors of intellectual property who need to be aware that an anti-assignment clause in the license agreement is not enforceable against the licensee’s lender who has taken the licensing agreement as security.
It affects rights with respect to accounts receivable. When an account debtor is notified by the account creditor’s lender that it has a security and demands payment, any payments made to the account creditor will not be credited to the account debtor, and the account debtor will remain liable to the lender for those payments.
It simplified the rules governing perfection of security interests. Perfection by filing is now available for additional types of collateral. However, perfection by filing does not preclude perfection by other means for some types of collateral. Care must be taken that a security interest perfected by filing does not lose priority to another security interest perfected by another method.
It makes compliance with the "where to file" rules much easier. Prior law required filing in the state where the collateral was located. For debtors with operations in multiple states, that often meant filing in every state where a debtor’s equipment was located. Now, a creditor need only file in the state where the debtor is located.
The revisions to Article 9 are global in scope and justify close scrutiny by every participant in secured transactions, as well as those who deal with parties whose existing or potential secured financing may affect an apparently unrelated transaction.
For more information, contact Marty Opich at Livingston & Mattesich.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
