Intellectual Property as collateral? New pledge law into force in Dominican Republic

Background

IP owners have the ability to leverage IP assets by granting a creditor or lender security interest in all or any of their intellectual property.

These security interest agreements must be recorded in the corresponding entity, usually it is before the Patent and Trademark Office (PTO).

In Dominican Republic, until early January, the security interest agreements had to be recorded before the Dominican PTO for them to have legal effect.

What is new?

On 20 January 2023 came into force a new law concerning security interest on movable property, which also regulates intellectual property rights as “intangible property”.

This new law creates a digital Recordal system for pledges named “Electronic System of Security Interest on Movable Property”, SEGM due to its initials in Spanish. SEGM is supposed to create leverage in moveable property as security interest by having a single system that would streamline its Recordal, publicity, and execution process.?

Important changes

These are some of the changes the new law brings into the IP world:

• Legal effect: while the Industrial Property Law provides that the legal effect of a security interest is upon registration before the Dominican PTO, the new law clearly states that the same has legal effect as soon as the agreement is signed by the parties, and it is effective against third parties when it is published by means of the registration in the SEGM.
• Recordal system: the Recordal of a security interest of Intellectual Property will be identical to all other personal property rights. Therefore, its Recordal will not be before the Dominican PTO but through the SEGM. Indeed, the law commands the Dominican PTO to issue a publication in its web page indicating that the security interests affecting intellectual property rights managed by such Office should be recorded and published through SEGM.
• Does this affect due diligence? Yes! Investigations before the Dominican PTO will no longer be enough to clear trademarks and patents for potential assignments, mergers and acquisition or even new pledges against IP rights.
• Recordal duration: the Recordal under SEGM will have a duration of 5 years, unless the parties agree otherwise, and may be renewed as needed.

Deadlines

The new law provides a 90-day deadline (20 April 2023) to move the Recordal of any security interest before SEGM without any official fees. After such term, official fees apply.

Since the law has just come into force, there are still many details to be defined by local authorities. Indeed, it remains to be seen if the Dominican PTO will check SEGM before allowing Recordals in ownership or cancellations of trademark and patent registrations.

Do not hesitate to approach your usual MINI?O contact for further information or email us at [email protected]?