When a licence is used as security: what to do first
When a lender, investor or counterparty takes security over an intellectual property licence, the licence itself does not change. What changes is who can act on it, and how fast. The first step is always the same: read the licence and the security document together, before any notice is sent or any register entry is requested.
Which framework applies to the underlying right
A licence is a contract layered on top of an underlying right. The security interest attaches to that underlying right, not to the wording of the licence alone. Which EU framework governs the right, and whether a public register exists for it, depends on what the right actually is.
| Underlying right | EU framework for the right | Public register for a security interest |
|---|---|---|
| EU trade mark | Regulation (EU) 2017/1001 (EUTMR) | EU trade mark register, kept at EU level |
| Unitary patent | Regulation (EU) No 1257/2012 | Register kept for unitary patents |
| Software copyright | Directive 2009/24/EC | No EU register; national rules apply |
| Database right | Directive 96/9/EC | No EU register; national rules apply |
None of these instruments sets out how a security interest over a licence is created, perfected or enforced. That question sits with national law, and the answer differs by jurisdiction. Treat the EU framework as identifying the underlying right, not as the source of the security rules.
What changes in practice
If the underlying right is a registered trade mark and security is taken over the licence built on it, the licensor's control over how the mark is used does not disappear. A related question, what happens when actual use drifts from the registration, is addressed separately: What to do first in this situation in practice. Here, the point is narrower: a security holder inherits the licence as it stands, including any limit on use, territory or sub-licensing.
Three things typically change once security is in place. Who must be notified of a default. Who may accept payment from a sub-licensee. Who may enforce the licence against a third party. None of this is automatic. It follows from the wording of the security document and the licence, read together.
What to do first
- Locate the licence agreement and check for a clause restricting assignment, sub-licensing or the creation of security. The party granting security does this before signing anything else.
- Identify whether the licence sits on a registered right. Where it does, check whether the register accepts an entry for a security interest, and who may file it.
- Notify the counterparty, in the form and channel the licence requires. Counsel to the finance party usually drafts and sends this notice.
- Check for a change-of-control or insolvency clause that could terminate the licence on the grant of security itself. This is reviewed before the security is granted, not after.
- Record the security interest in whichever register exists for the underlying right. Where none exists, keep the security document and proof of notice in a form that can be produced later.
Who decides, and on what evidence
Three different decision-makers can be involved, and each looks at different evidence. A registry office, where one exists for the underlying right, decides only whether an entry meets its own formal requirements; it does not rule on the validity of the underlying contract. The parties to the licence and the security document decide, between themselves, whether a default has occurred, based on the wording of both documents. A court becomes involved only if one side disputes what those documents mean, and it will read the licence, the security document and any notice sent, in that order.
If the details differ
If the licence covers design files still held by the agency that produced them, the security holder needs a route to obtain the files, not only the right to use them. See When an agency keeps the design files: what it.
If the licensed asset is represented on a distributed ledger and the licence points to a work stored off-chain, a failure elsewhere can affect the security without anyone touching the licence itself. See When the referenced work is removed in practice for that scenario.
If the licensor is under separate insolvency proceedings, the security holder's position depends on when the security was perfected relative to the opening of those proceedings. That is a question of national insolvency law, not of the licence.
What this page does not cover
This page does not value the licence, does not draft the security document, and does not settle priority between multiple security holders. It does not cover security taken directly over the underlying registered right, as opposed to the licence built on it. Each of those questions depends on the specific right, the specific jurisdiction, and documents this page has not seen.
What drives cost, and how fast we respond
What this takes depends on how many registers are involved, how many jurisdictions the underlying right touches, and whether a default has already been declared. A partner responds within minutes during business hours. A quote for handling the notice, the register entry or the dispute follows within one business day.
Related situations
A licence used as security is one of several situations where a licence's boundaries are tested by an event outside the licence text. Where the right itself runs out during the term, the sequence differs: When the right expires mid-term: what to do first.
Verified
Reviewed against the instruments listed below, each read as currently in force. This page does not cite national security-interest law, because no national implementing register is tracked at this file's current coverage level. How sources are tiered and delivered is explained separately: Sources by tier and delivery route explained.
- Regulation (EU) 2017/1001 (EUTMR) — in force from 1 October 2017
- Regulation (EU) No 1257/2012 — in force from 1 June 2023
- Directive 2009/24/EC — in force from 25 May 2009
- Directive 96/9/EC — in force from 27 March 1996
FAQ
What is the first step when a licence is used as security?
Read the licence and the security document together before sending any notice or filing any register entry. Check for restrictions on assignment, sub-licensing or the granting of security.
Which deadline is already running?
Whichever notice period the licence itself sets for informing the other party of a change of this kind. Where the licence is silent, the deadline follows the licence's general notice terms, not a fixed statutory number.
Who decides, and on what evidence?
A registry office, where one exists, decides only on the formal register entry. The parties decide, on the wording of the licence and the security document, whether a default has occurred. A court decides only if that reading is disputed.