A collateral assignment of trademark agreement, is a legal loan agreement that’s understood, signed by a lender (which could be a bank or any other type of financing institution or an individual) and the borrower, where the latter secures the loan amount by putting his organization’s trademark as a collateral (security asset). It differs from the general collateral based loans by putting up security that is not property in its traditional sense.
Going deeper into the subject of assigning an intellectual property as a collateral against a loan, we will see that it is not just the trademarks but also the registrations of trademarks (geographical barriers don’t pose a problem), trade names and the renewals and extensions of any existing logo and their continuation in future – all qualify as securities or collaterals. The agreement becomes null and void once the loan amount is paid back in full within the stipulated time.
When do you need Collateral Assignment of Trademarks Agreement?
Loan-seeking intellectual property owners are putting their trademarks more and more as collaterals, and the number of banks providing capital or credit to such owners is on the rise. Pledging an intellectual property asset as collateral requires using a security agreement that favors the bank more than the borrower and often, they severely restrict the trademark owner’s ability for alienating many of his/her intellectual property assets. The lender thus must perfect whatever interest it might have for the intellectual property, and the perfecting requires filing the right documents. It is where a collateral assignment of trademarks agreement comes into use.
The collateral assignment of trademarks agreement creates a security interest in trademarks when the trademark owner needs to borrow money against collateral, which is typically a patent, copyright, or a mark in this case.
Inclusions in Collateral Assignment of Trademarks Agreement
The owner of the trademark grants the lender some amount of security interest in the brand by signing an agreement. Since it is not a movable object or a personal property (in a traditional sense), the jurisdiction under which the loan gets sanctioned must favor the respective collateral assignment version of security interests that pertain to trademarks.
A Collateral Assignment of Trademarks Agreement is for everyone taking a mortgage loan keeping an intellectual property or IP as collateral, to ensure it serves as a document for:
- The amount of loan
- Interest amount
- Tax Deductible interest payments
- The loan tenure
How to draft the Collateral Assignment of Trademarks Agreement?
- Any Collateral Assignment of Trademarks Agreement needs proper scrutiny by the borrower before signing the document. It is because you are not putting up property in its usual sense for collateral but intellectual property, which brings in different clauses and terms to be dealt with, and this again makes it highly technical.
- You must provide the lender a valid proof regarding the ownership of your intellectual property; in this case, the trademark, so that further searches by the lender doesn’t result in detail mismatch. Try to present a Copyright Office filing as a collateral description; to identify the intellectual property marks and necessary related information.
- If the document is an Intent-to-use trademark, it will require a special mention. There’s no problem with providing such brands as security apart from that the foreclosure of the loan might become problematic. Also, be sure to update the borrower with periodic updates regarding any other IP that you’ve obtained newly or got registered.
Benefits of Collateral Assignment of Trademarks Agreement
A Collateral Assignment of Trademarks Agreement is a complex document that can catch any borrower off-guard if the clauses, terms, and conditions are not studied and understood correctly. If it contains the essential points that are integral to borrowing, then it has apt amendments. They are on the interest rates, type and amount; fee rates (whether fixed or floating or both), the default interest amount, pre-payment terms and conditions, steps that are an obligation to be there by the lender in events of default or cross default. The non-payment and insolvency, apart from a clear-cut description of the trademark you are pledging as the collateral against the loan.
Key terms/Clauses of Collateral Assignment of Trademarks Agreement
The collateral assignment of trademarks agreement documents the terms and conditions between a lender and a borrower where the trademark qualifies as collateral or security against the loan amount borrowed, and therefore, it highly becomes a kind of a mortgage agreement. It is a contract that binds both the lender and the borrower which grants both the parties certain rights and prohibits them from specific actions to avoid any disputes arising from the arrangement. A collateral assignment of trademarks agreement, therefore; becomes a contract by every means. Make sure you do not miss out on any of those in the final deal; else, you might run into intricate legal troubles.
Here is a sample template of a Collateral Assignment of Trademarks agreement. You can download it in doc/PDF format and can customize it according to your needs and requirements.
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