Security Interests In Intellectual Property Rights Under Ethiopian Security Device Law: A Critical Analysis

Abstract

IPRs are palatable and untapped resources for the use as security for debt-finance provided that the risks in the transaction are surmounted appropriately. In Ethiopia, as are many LDCs, access to credit, a critical element of healthy economy, through encumbering movable property is at its embryonic stage since only possessory security interests were encouraged. More immature is the availability of debt-based finance against IPRs as security. Both the practice in the business and the laws used to govern secured transactions were ignorant of security rights in IPRs. Even, in cases where fledgling business mortgage transactions were made, inclusion of IPRs were incidental and only for completeness of the transaction; not as frontline source of finance. Ethiopia’s recent move to reform secured transactions on movable assets, perhaps in line with UNCITRAL legal texts, will revamp security interests in IPRs. The objective of this research is to analyze the adequacy of Ethiopian security device law for the use of IPRs as security. It was conducted with mixed-type-research; descriptive and critical designs; and qualitative approach. Hence, primary and secondary data sources were extensively used. Accordingly, owing to different inherent complexities existing within IPRs, the reform is found inadequate even for IPRs embedded in business mortgage that introduced to Ethiopian legal system about six decades ago. Also, the reform would not be realized with lender’s trust for traditional assets than IPRs. Moreover, without devising the financing scheme needed to level the playing field, the reform will merely symbolic. The researcher recommends for legislative fiat with detailed rules on all the stages through creation to enforcement of security interests and on valuation of IPRs. In addition, policy matters for garnering trust in, and incentivizing, security interests in IPRs through different financing schemes must be devised.