More than just a passing interest: ensuring your rights are secured under the PPSA

Date: 2014-01-09
Author: Karen Bentley

If you are a holder of a security interest in personal property (including patents) you will need to record the interest on the Personal Properties Security Register (PPSR) before 31 January 2014, otherwise you may lose the priority of your interests to other competing parties.

The Personal Property Security Act 2009 (PPSA) established a new single national register for recording security interests in personal property in Australia – the PPSR.

There is an upcoming deadline (31 January 2014) by which any interests in IP assets (including patents) must be recorded on the PPSR. This applies where the grantor of the security interest is either:

a) an Australian entity (e.g. a security interest over a foreign patent owned by an Australian grantor),


b) if the patent is an Australian patent (e.g. security over an Australian patent owned by a foreign grantor).

Under what circumstance can a security interest exist in a patent?

There are two circumstances to consider.

1. License

The most common form of a patent licence, permitting a third party to use/exploit a patent, will not create a security interest.

Where a licence may involve the creation of a security interest is if the licence provides rights to another party to ensure access to the patent in the event that the first party fails to meet their obligations. For example:

  • Party A promises to provide services to Party B using patent X (owned by Party A),
  • Party A also grants a licence to Party B to use patent X that is exercisable only if Party A fails to provide the services or becomes insolvent, to enable Party B to get the services by another means.

2. Mortgage

A mortgage of a patent is a grant of a security interest and therefore mortgages of patents should be recorded on the PPSR.

There may also be a security interest in a patent in other circumstances, for example, where you have an agreement that someone else will get the rights to your patent if you fail to fulfil your obligation(s) under the agreement. If you are unsure as to whether a security interest may exist in your patent, please contact us.

What action do I need to take by the 31 January 2014 deadline?

The key point to understand is that security interests already recorded on the Patents Register have NOT been transitioned to the PPSR. And as the rules regarding enforceability, priority and extinguishment of security interests are determined by the PPSA and whether or not the security interests are registered on the PPSR, any such security interests only on the Patents Register, to be enforceable, must be transferred to the PPSR before the January deadline. Please contact us if you would like any assistance in this regard.

The partner responsible for this area is James Cherry.