Patent pledge

The pledge of a patent is the security interest by which the holder of a patent or of a patent application charges that title as security for the payment of a debt, without parting with it. The creditor benefits from a preferential right over the sale price of the patent in the event of default by the debtor. The pledge of a patent is expressly provided for by the French Intellectual Property Code, which makes its enforceability against third parties subject to recording in the National Patent Register.

The conditions of the pledge of a patent

First, the pledge covers an intangible movable and follows the regime of pledges of intangible movables provided by the Civil Code. It must be recorded in writing, on pain of nullity, with a precise designation of the pledged titles and of the secured debt. Second, it may cover a French patent, the French part of a European patent or a patent application, as well as a patent licence. Third, the patent may also be included in a pledge of a business as a going concern, which extends to the industrial property rights attached to the business. The provisions can be consulted on Légifrance.

Recording and effects

Recording in the National Patent Register, kept by the INPI, makes the pledge enforceable against third parties, notably later purchasers and licensees, and determines the ranking between creditors. For a European patent, recording in the register of the European Patent Office is possible while the procedure is pending. The holder retains the exploitation of the patent and collects the royalties, but may not surrender the title or let it lapse without incurring liability. In the event of default, the creditor has the patent sold or seeks its judicial attribution.

Key points

In practice, the pledge of a patent is used in the financing of innovative companies, in particular where the patent portfolio is the main asset. Its value for the creditor depends on a prior assessment of the validity of the titles and of their exploitation. The firm acts on these transactions and on the ownership audits that precede them, as presented on the page patent commercialisation.