Registration and Enforcement of Security over IP Rights in Onshore UAE
Intellectual Property / UAE
Edward ImrieAssociate,Intellectual Property
The legal framework for the registration and enforcement of security interests over intellectual property (“IP”) rights in onshore UAE is covered by a combination of different federal laws. This is designed to facilitate the use of IP asset as collateral, thereby encouraging and enhancing the ability of businesses to secure financing. This article provides a brief overview of the registration and enforcement processes for security interest over IP assets in onshore UAE, drawing on the relevant provisions from the UAE's legal statutes.
The UAE's legal framework for IP rights is governed by several key pieces of legislation, including the Federal Decree-Law no. (36) of 2021 (“Trademark Law”), the Federal Law No (11) of 2021 (“Industrial Property Rights Law”), and the Federal Decree-Law no. (38) of 2021 (“Copyright Law”) (together, the “UAE IP Laws”). These laws collectively cover the protection, registration, transfer, and enforcement of trademarks, patents, industrial designs, copyrights, and other related rights. Careful attention needs to be given to these laws, particularly regarding the practicalities involved with the change of ownership of these registered IP rights when enforcing such security interest.
In order to enforce security over IP rights, the parties must first ensure they comply with the general requirements for creating a security interest. The security interest must be appropriately documented with valid underlying obligations under a security agreement containing a clear and specific description of the secured asset, the nature of the security interest and the consent of the owner of the asset. It then needs to be recorded at the appropriate register depending on the IP right. This ensures that the security interest is “perfected”, and therefore, effective against third parties.
For IP rights that are registered with the Ministry of Economy (“MOE”) (i.e. potentially trademarks, patents, designs and copyright), the security interest must be registered with the MOE.
Once the application is accepted, the MOE will publish the details of the security interest in the relevant IP Register and the MOE's Bulletin, thereby making the information accessible to the public and notice to third parties.
For other types of IP rights / intangibles i.e. those that are not registered with the MOE, such as know-how, data lists, trade secrets, unregistered trademarks and copyright etc., the Federal Law no. (4) of 2020 on Securing the Rights in Movables (“Movables Law”) states the security interest must be registered with the Emirates Integrated Registries Company (“EIRC”) on their Emirates Movable Collateral Registry. This is an online register that provides lenders with the ability to register their interest over assets used as a collateral. Third parties can then search the online register to find out if there are any parties that have registered interest over a specific asset.
One point of consideration is that the Movable Law is still relatively new, and so in practice, registering security over unregistered IP rights in the UAE may not be extensive yet – uncertainties regarding valuation, identification and enforcement are issues that should require legal advice.
Careful consideration must also be given to the nuances and challenges that come with maintaining the secured IP rights such as the need to periodically renew the protection of some IP rights such as registered trademarks and/or the need to ensure proper safeguards are in place to protect the IP rights against third party infringers as well as the validity of such IP rights. These can typically be addresses by including appropriate IP provisions in the security agreement.
By allowing IP assets to be used as collateral, the UAE facilitates greater access to financing for businesses, thereby promoting innovation and economic growth within the country.
The enforcement of security interests over IP rights in onshore UAE is primarily governed by the Movables Law. This law outlines the procedures and mechanisms for enforcing security interests, including those over IP rights, and emphasizes the role of the judiciary in overseeing and facilitating the enforcement process. There are different laws applicable to taking and enforcing security over IP in freezone areas such as the DIFC and the ADGM – please reach out for a separate discussion.
Methods of Enforcement: There are a couple of methods for enforcing security interests against third parties:
Registration in the Register: As mentioned above, the security interest must be registered in the relevant register to be enforceable against third parties.
Possession or Control: The security interest can also be enforced by taking possession or control of the IP asset.
Priority of Security Interests: The priority of security interests is normally determined by the date and time of registration. The first registered security interest has priority over subsequent interests. The law also provides for the automatic extension of the security interest to the proceeds and returns of the IP right i.e. any income or benefit derived from the IP asset.
Enforcement Procedures: The enforcement procedures for security interest over IP rights include:
Notification: The secured party must notify the debtor and any other interested parties of their intention to enforce the security interest.
Possession and Sale: The secured party can take possession of the IP right and sell it to satisfy the secured obligation.
Court Orders: The secured party can also seek a court order to enforce the security interest via judicial enforcement.
Judicial Enforcement: In cases where the debtor defaults on the secured obligation, the secured party can seek judicial enforcement of the security interest. The process involves:
Filing a claim: The secured party can file a claim in the competent court, seeking enforcement of the security interest. The court's involvement is crucial in legitimizing the enforcement actions and providing a legal basis for subsequent steps.
Court Orders: The court can issue orders for the seizure of the IP right, allowing the secured party to take control of the asset. This step is essential to prevent the debtor from disposing of or encumbering the asset further. If the sale of the IP asset is necessary to satisfy the secured obligation, the court can issue orders for the sale of the IP asset to satisfy the secured obligation. These orders specify the terms and conditions of the sale, ensuring that it is conducted in a commercially reasonable manner. The court may also appoint a receiver to manage the sale process.
Distribution of Proceeds: The proceeds from the sale of the IP asset are distributed according to the priority of the security interests.
If a dispute arises during the enforcement process, court orders provide a mechanism for resolving these disputes. The Court can issue orders which serve as a means of resolving disputes that may arise between the secured party, the debtor, and other creditors.
It is important to note that as enforcement procedures lead to a transfer of ownership of IP rights, consideration must also be given to the obligations set out in the IP Laws which may affect the ability of the secured party to effectively dispose of the IP asset in the event of a default. This could impact the timeframe and lead to extra administrative costs. For example, the assignment/transfer of the IP right as well as the publication of such assignment/transfer in the official journal will need to occur in order to ensure that the assignment/transfer is enforceable against third parties. These are processes that can lead to inherent delays when proceeding with enforcement of the security interest over IP rights that may not exist with other types of asset classes, and so legal advice should be sought over.
In conclusion, the UAE's legal framework for the registration and enforcement of security interests over IP rights is comprehensive. By allowing IP assets to be used as collateral, the UAE facilitates greater access to financing for businesses, thereby promoting innovation and economic growth within the country. The registration process ensures that security interests are properly recorded and enforceable against third parties, while the enforcement procedures provide secured parties with effective remedies in the event of default. As the UAE continues to develop its IP regime, these provisions will play a crucial role in supporting the country's vision of becoming a global hub for innovation and creativity.
For further information,please contact Edward Imrie.
Published in March 2025
