Intellectual Property Rights: securities for loan and advances
Currently, a rule has been made for the loans by the Supreme court that a borrower who has defaulted the loan cannot be assigned as a trademark to a bank, while in the matter of Canara Bank vs NG Subbaraya Setty assignment of trademark was held by the Supreme Court for agarbattis, as a security for a loan outstanding is against the Trademarks Act and the Banking Regulation Act. The Supreme Court gave the opinion that the trademark cannot be said to the property which has come into possession by the bank in compensation of any of the claims of the bank. If you consider the trademark as security for a loan then it is cleared that trademarks are not the part of any securities for loan and advances. Intellectual Property Rights are made for securities for the loan.
The supreme court has also cleared that section 6 and 8 of the Banking Regulation was in anticipation of the assignment. The supreme court also stated that for selling agaebattis, a trademark can not be used by the bank and goods can be sold only to realise the security held by it and the banking business cannot be stepped outside. the 3rd party is not allowed to use the trademark and also not allowed to get a royalty. Supreme Court also stated that there is a high penalty for the bank manager who accepts the assignment of the trademark if the manager does that he/she would be dismissed and prosecuted.
It is regardfully accepted that the parties to the litigation should have viewed the entire matter in the subject of provisions contained in the Securitisation and rebuild of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Section 2(1)(t) of the SARFAESI Act explains the expression property and specifically includes abstract assets being know-how, trademark, copyright, licence or franchise. Further section 2(1)(if) defines “security interest” as a right title or interest of any kind upon property created in favour of the secured creditor and involved such right title or interest in incorporeal assets.
It is further accepted that all security interests generated over property rights in favour of banks and financial institutions are relocated of interest or rights in the property and in the event of default in repayment of the loans secured by the security interest and the lenders have a right to sell the property and realise their defaulted loans. The same principles are applicable in respect of intangible property rights such as trademarks or copyrights or patents and licence to use the intangible property for a specified royalty has to be treated as equivalent to the sale of secured assets to recover the loan.