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.
“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.”
“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.”
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.