What Is a Copyright Collateral Agreement?
In a loan transaction, the borrower is required to provide his assets to the lender as evidence of security. When the debtor uses his copyright license to secure the loan amount, the resulting collateral is termed as Copyright Collateral. A Copyright Collateral Agreement is therefore executed between the borrower and the lender when the latter secures the debt using Copyright security agreement as Collateral.
When Do You Need a Copyright Collateral Agreement?
The agreement is useful when the debtor wishes to secure the funds loaned with the help of a copyright license. A Collateral security agreement is most commonly used in creative fields such as music, sound, and video recordings. The agreement is also used by certain technology companies by pledging copyrights to their software to secure loans.
Inclusions in a Copyright Collateral Agreement
The agreement should be drafted clearly and concisely. While the contents of the agreement may vary, it should typically include the following:
- Name of the pledgor and secured party
- Details of the security/loan transaction under which the copyright is being pledged
- Details of copyright that is agreed to be pledged
- Ownership of copyright
- Circumstances under which copyright will be transferred in the name of the secured party.
- Representation and warranties of the pledgor
- Covenants of the pledgor
- Governing Law
- Miscellaneous provisions, if any
How to Draft a Copyright Collateral Agreement?
When drafting an agreement, some points to keep in mind are:
- The worth of the copyright in the market
- Whether any lien is on the copyright or not
- The expiry of the copyright
- Whether the copyright is owned by one person or jointly
- Whether the copyright is currently in use by any person
- Whether the assignment of such copyright will injure some party’s business
It is important to draft the agreement in a clear manner. The agreement should use simple language and state the responsibilities/rights of the pledgor and secured party without the use of unnecessary jargon.
It is important to note that this agreement is only a security mechanism in a loan transaction and does not automatically allow the lender to claim rights on the copyright pledged.
This agreement can be drafted as an addendum to the principal security agreement or can be drafted separately as a standalone contract. It should be in line with the copyright laws and should be recorded with the Copyright Authorities of the state.
Benefits of a Copyright Collateral Agreement – Pros and Cons
This agreement has a lot of benefits. Some of them are:
- It is a security for the borrower in case of default
- The borrower can get more funds by offering the copyright as a collateral.
- It is a safe way because the copyright is governed by the law and therefore can’t be misused
However, since copyrights are subject to termination and reversion under Copyright laws, the lender can sometimes be left jeopardized if the borrower suddenly ceases to be the owner of the copyright pledged. It is therefore important to draft the agreement with utmost caution and in line with the applicable laws.
Key Terms/ Clauses of a Copyright Collateral Agreement
While the terms of an agreement may vary, it should contain the following information:
- Details of Copyright Collateral and conditions for its establishment and use
- Representation and warranties by the debtor
- Obligations of the parties
- Details of Copyright Laws under which the copyright pledged is covered
- Miscellaneous provisions, if any.
This agreement is a legal agreement wherein the debtor uses his copyrights or copyright license as a means of securing a loan transaction. The Copyright Collateral Agreement should be in line with the applicable copyright laws and should be drafted in a clear and concise manner.
Sample for Copyright Collateral Agreement
Download a sample of the Copyright Collateral Agreement below.
Download this USA Attorney made original Agreement for only $9.99