Securities Interest and the LGM

By: Federico Torrealba Navas

Attorney At Law – Facio y Cañas

August 2017

The LGM admits constituting warranties over Intellectual Property (IP) rights. Subsection 39 states: A lien over intellectual property rights can be constituted via a securities interest contract, including among others, trade secrets, copyright, patents, trademarks, business names and other assets derived that can be attributed to these. The securities interest over intellectual property must be registered before the Security Interest Registrar so that it becomes effective before third-parties. The warranty can encompass the rights of the Intellectual Property itself, as well as present or future credits derived from their exploitation (i.e. the right to pursue royalties).


Its possible to constitute securities interest over future intellectual property rights, for example, to ensure the rights of the employee or the employer in the context of a software development project. An editorial house can advance payment to a writer, with securities interest over the estate of the author and his future works.


An agro-industrial firm can finance the development of new vegetable varieties with securities interest over the breeder. The securities interest over future things, the opposition of third-parties precedes to the existence of the warrantor. Once this ceases to exist and enters the estate of the debtor – warrant, the lien is set “ipso iure,” but prelation is retroactive to the date of publicity of the interest over the estate of the author upon future works. As a result, the principal of the software development project, the editorial house that sponsors the author and the agro industrial enterprise that finances the botanical investigation ensure, beforehand, the prelation of its rights before eventual rival interests.


In securities interest matters and commerce its important to keep in mind that the Distinctive Figures Trademark Law establishes the annulment of distinctive figures as follows: “… if the change in the ownership of the right is susceptible to cause a likelihood of confusion (Subsection 33: LMSD).” Therefore, if the Business Brand alienated forms part of an inseparable group of brands that the public consumer identifies himself with, the act can be annulled. This rule applies, undisputedly, to the securities interest over brands, due to the fact that every property right is, intrinsically, an alienation subject to conditioned indeterminately.


As a result, it convenes to the creditor: First, to verify that the brand becomes susceptible of individual transmission without a likelihood to cause confusion to the public; second, if this is the case, to negotiate that the security interest becomes universally fixed- de facto, by a group of brands, present and future, that the public can relate to a common business origin; third, that the clauses of auction and execution, stipulate the undividable conventionality of the assets.


In relation to securities interests, pertaining business names, its important to keep in mind that these are non-transferable autonomously (Subsect. 69: LMSD).


The warranty of a business name is valid only if it comprises the universality of right comprised by the business establishment.


Pertaining to securities interests and patents, its important to ponder the annulment risk of the patent, which can be requested during the entire term of its shelf life (Subsect. 21.3 LMSD)


Also, its viable to constitute securities interest over copyright pertaining architectural and engineering works. To the extent that intellectual inventions are dealt with, the architectural and engineering works represented in preliminary projects, and building plans are subject to safeguard. The estate rights over copyright pertaining to such works can be subject to securities interest. From the visual perspective of the creditor of building plans, its convenient to constitute, besides the mortgage over the land, a securities interest over copyright, this way, in case of breach, the adjudicator in foreclosure can continue with the development of the project, without having to bargain a new license with the owner over the work represented in plans.

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