UNCITRAL security interests consultation update

Canada is off once again to Vienna to chair the UNCITRAL initiative on security interests. The Canadian delegation is now in Vienna from November 2 to November 6, 2009.

Canada has provided the Chairperson for UNCITRAL'S Working Group VI, which deals with Security Interests since its first session in New York in 2002. She is Kathryn Sabo of the federal Department of Justice. This is the 16th session of Working Group VI. All of the meetings have taken place in New York and Vienna.

Working Group VI has come up with a basic “Guide” document dealing with security interests generally. The main document is here. Don't be in a rush to hit “print”. It's over 500 pages long.

The supplementary material, currently under consideration, and which seems to deal mainly with IP, is inconveniently split up into small chunks, is here.

Even though these latest draft papers date from July of 2009, the consultation by telephone took place only last week on October 29, 2009.

IPIC (Intellectual Property Institute of Canada) took part in the consultation and has prepared some good written commentary. It has an active and well informed committee. It provided suggestions on acquisition financing, continuous filing, the “ordinary course” rule, and choice of law relating to royalties. IPIC also provided detailed comments back in April. Without the prodding of IPIC and perhaps my occasional blogs, I doubt that there would have been any consultation.

The problem for most readers of this blog, and even its author, is that these several hundred pages of documents are written in very inscrutable international bureaucratese about very technical stuff at the edge of IP, bankruptcy, insolvency, licensing, and banking/lending law. Even if one has the time to read all of the documents, this is very tough going. There are probably only about a couple of dozen people in Canada who can make much sense out of them, and probably less than a handful of people who have serious expertise in all of the necessary areas.

We struggled with all of this almost a decade ago when the late lamented Law Commission of Canada looked at the issue - and we did come up with a perfectly readable book that I edited, still available here.

But the current landscape is quite unreadable. Given the undoubtedly large investment made by Canada in the time and travel costs of providing a Chairperson and three experts to advise her for this UNCITRAL Working Group VI efforts over the several years, I would have thought that Canadians could be provided with a few pages of explanatory documents about what is going on and how it may affect them.

I've been told that the UNCITRAL soft law initiative is consistent with Canadian law. That is not without irony because Canadian law is not exactly very clear on lots of fundamental questions, as anyone who reads my book will quickly see. Little has changed since that book was published in 2002. The UNCITRAL efforts will presumably provide a framework for other countries thinking of legislating in this area. This will supposedly benefit Canadians seeking to do business in such countries. If this is so, is it too much to ask that our government inform Canadians what this is all about in language that Canadian lawyers, bankers and other stakeholders can understand?

These issues are potentially very important for those in sectors such as film, sound recordings, software, and high tech generally where financing deals can readily involve IP as collateral, if there is sufficient expertise to do such deals. Indeed, most of the discussion at last week's “consultation” concerned acquisition financing, presumably a hot topic in these sectors. There was considerable confusion about what version of the latest document from UNCITRAL will be “official” on this issue.

Unfortunately. the Department of Justice, which is leading Canada's participation, has no interest in providing any explanation of the UNCITRAL documents to Canadians and the consultation effort has been invariably been passive, infrequent (only two or three occasions of which I am aware) and on the eve of any of the meetings in New York or Vienna, Consultation requires more than providing a link to UNCITRAL's website.

One would hope that Canada's expert team could provide a brief of a few pages outlining what this Guide and its IP Supplement will do, Canada's role in this process, and why Canadians should be interested. Above all, we need to know the main features of the proposed soft law regime. Surely with all of the expertise our delegation has, and the fact that we Canada has invested hundreds of thousands of dollars or more in providing the chair and other support for this effort, the provision of an explanatory document is not too much to ask. It might even foster investment and innovation.

HK

Canadian Un-Consultation re UNCITRAL Security Interests in IP Project

Despite the fact that a Canadian government official from the Department of Justice has been chairing UNCITRAL's work on security interests in IP for several years, there has been almost no consultation with the private sector in Canada on this important subject. The Europeans are very aware and involved - for the obvious reason that using IP assets as collateral to raise capital can be crucial to financing innovation. Here's info about a recent seminar in London, in which my friend Jeremy Phillips was instrumental.

Here are the links to the papers that will be discussed in Vienna from November 2-6, 2009. The papers date from July, 2009.

But so far, there have been no attempts of which I am aware by Canada's government to consult with Canadian experts and stakeholders in preparation for the November meeting. This failure to consult on this issue is deja vu all over again.

This is really a pity, given all the work of the late lamented Law Commission of Canada and many individuals under that aegis that was done on this issue. I was privileged to have advised the Law Commission on this project and to have edited the resulting book, which contains many excellent papers from Canada and abroad.

HK

PS - the UK government is seeking input on this process, perhaps as a result of my friend Jeremy's efforts. See this.

It is possible that the Canadian government believes that there is insufficient interest here to warrant consultation. That, however, would be an incorrect and conclusory inference. If there is lack of obvious exitement over this in the private sector, it may be only because the private sector is almost completley unaware of what has been going on at UNCITRAL for several years. One of the the main functions of consultation by government is educational. Up to now, this has not happened. Hopefully, our government will find a way to share its expertise with the private setor, so that meaningful and timely input can be obtained. The issues are very technical and complex. But there are those who care and are capable of comprehending them. It would be unfortunate if the private sector becomes informed about all of this only when it is a fait accomplit.

UNCITRAL and IP Security Interests

UNCITRAL is having another meeting about this on April 27, 2009, so it seems. I know about this only because a UK based blog specializing in this topic is upset that the UK government has given only two weeks notice for consultation. HT - as is frequently the case - to the IPKAT.

As far as I know, the Canadian government - which is very influential behind the scenes in this UNCITRAL process - has given no notice to Canadian stakeholders. In fact, a Canadian official from the Department of Justice has served as the Chairperson of the responsible UNCITRAL working group. As far as I know, I am still on the Canadian Department of Justice's email list for this - so I assume that I would have received anything sent out.

This UNCITRAL effort may or may not be useful and productive. But it seems that Canadian stakeholders will be among the last to know.

Even if the the problem with late distribution of documents lies with UNCITRAL, this is not the way to inform stakeholders and to get their ultimate acceptance of whatever may be the result of UNCITRAL's work.

I have noted the inadequate consultation by the Canadian government with Canadian stakeholders previously here.

PS - I have confirmed that IPIC , which is Canada's leading dedicated IP organization, has also not received anything or been consulted about the April 27, 2009 meeting.

PS #2 - The comment below appears to be from a senior person at UNCITRAL. The documents he refers to (without a link) are indeed available here. Although dated in January and February of this year, the PDF properties date for the substantive documents is March 17, 2009 - which suggests that they may have been posted as early as that date. The agenda for the April 27 meeting goes back to November and bears a PDF properties date of January 13, 2009. I don't know when these documents were actually posted.

While I'm pleased to pass along information such as this, Canadian stakeholders should not have to depend on my blog, much less foreign based blogs, to learn about these types of developments, esepcially when our Government is directly involved. Moreover, Canadian stakeholders would normally have input to this process only through the Canadian government. IPIC is not an NGO in this case, because it is not an international organization. This is consistent with traditional UN practice.

The issues inovlved in this UNCITRAL project are extremely complex and the docuemnts require a lot of time to digest, even for experts.

To its credit, WIPO recently held a day long program on March 10, 2009. However, as far as I know, Canada had no involvement and past Canadian work played no part in the program. Moreover, the private sector cannot simply jump on a plane and go to Geneva for a day to keep up to speed on issues such as this. That is why we depend on our government to represent our interests and and to inform us of current developments.

PS #3

"Spiros" below is presumably Mr. Spiros Bazinas spiros.bazinas@uncitral.org at UNCITRAL who posted this on the IP Finance blog:

Jeremy,

The April 2009 meeting of the Working Group is not the last meeting. The draft IP Annex should be completed by the Working Group early in 2010 and by the Commission in the spring of 21010. [sic] So, there is ample time for comment either to the UK or other Government, other IGO, NGO or directly to UNCITRAL.

This is useful, although it is questionable as to how effective any private sector submissions can be at this late stage. However, Mr. Bazinas, at least, to his credit seems amenable to communication and he kindly provided his email address, as noted above.

HK

Security Intrests in Intellectual Property - WIPO, UNCITRAL and Canada

WIPO is having a "Information Meeting" on IP financing on March 10, 2009. Here's the program. Canada is apparently playing no role in this program, unless some officials are planning to attend.

I am frankly disappointed that our Government has not been more involved with WIPO on this issue, considering all the work that the late and lamented Law Commission of Canada ("LCC") did on it, which resulted in a book that I edited which includes contributions from leading experts in Canada, Australia, the USA and UK. This was a great project and I was pleased to have advised the LCC on it. It's a pity that all of the work is apparently being ignored, even by Canada's own government.

BTW, here's info about the book, which includes a preface by Hon. Marybeth Peters:

And for those who want a quick tour of the issue, here's the unofficial version of Chapter 1, which is the version that I presented at the Fordham Conference in 2001.

Nonetheless, despite the state of the art work done under the LCC in Canada, officials from CIPO and the Federal Department of Justice are involved with a process at UNCITRAL that has been dealing with these issues for a long time in mysterious ways that don't adequately involve Canadian stakeholders. Unfortunately, although Canada has played a leading role in the work of UNCITRAL through participation of the Department of Justice, there has been almost no consultation back home in Canada.

Even when there has been contact, there has not been enough time to react. For example, I received a link to this 541 page document on October 16, 2004 four days before an UNCITRAL Working Group was due to meet along with about 8 other lengthy documents , all of which were dated much earlier in the year.

Although I can't speak for the Intellectual Property of Institute of Canada, one might have thought that it - as Canada's leading dedicated IP professional institute - would have had a meaningful role in this process. However, this has not been the case because of the inadequate consultation.

All of this is a pity because, as if the issues of IP financing were not important enough anyway, the recent world economic mess makes them even more critical. Many companies may have little left in this economy other than their IP - and IP can be used to unlock credit and to secure financing, and in other creative ways.

All of this, unfortunately, is not something that our Government seems to be eager for us to know about or be involved with.

The fact that UNCITRAL's efforts have not resulted in hard law or a treaty and are still at the soft or model law stage is hardly comforting. Maybe they should have gone for a treaty approach. Or maybe they will - but it may be too late for Canadian stakeholders to have meaningful input. This is what happened with the 1996 WIPO treaties which morphed from soft model law to a very important and controversial treaty before many people knew what was happening.

There are also significant questions as to why UNCITRAL is leading on this issue and not WIPO, but those questions are for another day.

HK

Blame It All on Bowie Bonds?

There are some interesting stories being published blaming the current financial meltdown on - get this - David Bowie and his “Bowie Bonds” from about ten years ago. Here's The Guardian and here's the Rolling Stone and here's the Mirror story on which the others are based.

These bonds were an example of the “securitisation” of IP - whereby investors get income based upon a reliable royalty stream and the IP holder gets cash up front. The financier who takes credit for the Bowie Bond type of transaction is David Pullman of the Pullman Group in NYC. The original Bowie Bond issue generated about $55 million in 1997.

Transpose this idea of revenue generating asset (copyright) based bonds and magnify by several orders of magnitude to the mortgage backed securities that have fueled the current meltdown. That’s the gist of these articles.

Of course, it's silly to blame the current meltdown on the Bowie transaction. But the transaction was an important milestone in the road to the use of asset based securities. In fact, the use of IP in a much simpler way as collateral security is something that is also very important and could be used to convince nervous lenders to give credit these days to a wide range of companies that need financing - NOW.

Nortel , which has just filed for bankruptcy protection and has an extraordinary portfolio of IP, might want to think about this, if it hasn't yet done so.

In fact, I have done a lot of work for the late lamented Law Commission of Canada as their advisor on security interests in intellectual property, which resulted in a book on the subject which I edited and to which many including myself substantially contributed. The book, which is international in scope, is still available here.

HK