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After Acquired Property

ContractStandards Analysis
 Article  Type
   Representations and Warranties  Deal Specific

The After Acquired Property clause generally warrants that the Company has included all of the relevant Intellectual Property as part of the Security Agreement.  Additionally, it warrants that the Company will notify the Secured Party of any omissions or newly acquired IP so that the Secured Party can take further steps, if necessary, to properly perfect the security interest.  

The After Acquired Property clause is not found frequently in the Intellectual Property Security Agreement sample set, however, when the clause is present, similar elements are present in each clause.  However, even though the elements are similar, the language is still significantly divergent.  One possible explanation for the infrequency of the clause is that it is often somewhat duplicative of the Grant of Security Interest (that usually includes a grant for after-acquired IP).  Additionally, as mentioned in other clauses, there may be similar warranties in an accompanying agreement.

Standard Clause

All Intellectual Property Included. Company hereby represents and warrants to Secured Party for the benefit of the Secured Party  that the Intellectual Property listed on the Intellectual Property Exhibits constitute all of the Intellectual Property [material to the Company's business and] now owned by Company

Any Additional or After Acquired Property Automatically Included. If, before all Obligations shall have been satisfied in full [or before the Loan Agreement has been terminated], Company shall 
(i) become aware of any existing Intellectual Property [material to the Company's business] of which Company has not previously informed Secured Party,
(ii) obtain rights to any new patentable inventions or other Intellectual Property [material to the Company's business], or 
(iii) become entitled to the benefit of any Intellectual Property [material to the Company's business] which benefit is not in existence on the date hereof, 
the provisions of this Agreement shall automatically apply thereto and Company shall give to Secured Party prompt written notice thereof.

Company Responsibilities. Company agrees to execute and deliver any and all documents and instruments necessary or advisable to record or preserve Secured Party's interest in all Intellectual Property added to the Intellectual Property Exhibits pursuant to this Section.

Authorization to Modify and Refile.  Company hereby authorizes Secured Party to modify this Agreement by amending the Intellectual Property Exhibits, as applicable, to include any such Intellectual Property, and to file or refile this Agreement with the appropriate government offices.

Discussion

The holdings of Peregrine and AEG, which suggest that a U.C.C. filing is insufficient to perfect a security interest in copyright, were later adopted in In re Avalon Software Inc. In Avalon, a bank had attempted to perfect its security interests in a debtor's copyrighted and copyrightable property by filing a UCC-1 financing statement with the Arizona Secretary of State. The bank never filed with the Copyright Office. Citing AEG, the court held that a security interest in a copyright is only perfected when filed with the Copyright Office. The court also stated that after filing with the Copyright Office, ultimate perfection depended on registration of the product. Accordingly, the court concluded that the bank's filing with the Secretary of State failed to perfect its security interests. In reaching its conclusion, the court noted that had the bank recorded its security interests in the Copyright Office and then registered the after-acquired property, it would have perfected its security interests...[another] court, however, refused to go farther and extend the holding of Peregrine to unregistered copyrights.
John F. Hornick, Security interests in Intellectual Property (via Finnegan, Henderson, Farabow, Garrett & Dunner, LLP)

After-Acquired IP. The credit or security agreement will usually require the borrower to deliver periodic updates listing any newly acquired or registered IP (including a requirement to inform the lender as soon as an unregistered copyright became registered).  UCC-1 filings can be structured to effectively cover after-acquired assets in the initial filing, but new filings with the PTO or the Copyright Office will be needed to cover each additional IP item.
Svetlana Attestatova, Intellectual Property - Make Sure You Are Perfected! (via Reed Smith LLP)

Examples of After Acquired Property Clause

Covenants and Warranties. Grantor represents, warrants, covenants and agrees as follows:

        (a)   Grantor has no present maskworks, software, computer programs and other works of authorship registered with the United States Copyright Office except as disclosed on Exhibit A-1 hereto.

        (b)   Grantor shall undertake all reasonable measures to cause its employees, agents and independent contractors to assign to Grantor all rights of authorship to any copyrighted material in which Grantor has or may subsequently acquire any right or interest.

        (c)   Grantor shall promptly advise Secured Party of any Trademark, Patent or Copyright not specified in this Agreement, which is hereafter acquired by Grantor.

        (d)   Grantor shall not register any maskworks, software, computer programs or other works of authorship subject to United States copyright protection with the United States Copyright Office without first complying with the following: (i) providing Secured Party with at least 15 days prior written notice thereof, (ii) providing Secured Party with a copy of the application for any such registration and (iii) executing and filing such other instruments, and taking such further actions as Secured Party may reasonably request from time to time to perfect or continue the perfection of Secured Party's interest in the Collateral, including without limitation the filing with the United States Copyright Office, simultaneously with the filing by Grantor of the application for any such registration, of a copy of this Agreement or a Supplement hereto in form acceptable to Secured Party identifying the maskworks, software, computer programs or other works of authorship being registered and confirming the grant of a security interest therein in favor of Secured Party.
(Intellectual Property Security Agreement, June 30, 2003, [Silicon Valley Bank and Alibris])