VZCZCXRO9714
PP RUEHRN
DE RUEHUNV #0596 3180906
ZNR UUUUU ZZH
P 130906Z NOV 08
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 8670
RUCNDT/USMISSION USUN NEW YORK 1389
RUEHBS/USEU BRUSSELS
RUEHRN/USMISSION UN ROME 0054
INFO RUEHVI/AMEMBASSY VIENNA 1261
RUEHXX/GENEVA IO MISSIONS COLLECTIVE
RUEHFR/AMEMBASSY PARIS 0880

UNCLAS UNVIE VIENNA 000596 
 
DEPT FOR IO/T, EB/IFT/ODF AND L/PIL 
EMBASSIES FOR ECON/POL 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ABUD AORC EAID EINV ETRD KCRM KUNR UNCITRAL AU UN
SUBJECT: UNCITRAL: SECURED TRANSACTIONS WORKING GROUP ADDRESSES 
INTELLECTUAL PROPERTY 
 
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SUMMARY 
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¶1.  (U) UNCITRAL Working Group VI (Secured Transactions) at its 2008 
session in Vienna, October 20-24, continued its work on the 
preparation of an annex to the 2007 UNCITRAL Legislative Guide on 
Secured Transactions (hereafter "the Guide") on security rights in 
intellectual property (IP).   The United Nations Commission on 
International Trade Law (UNCITRAL) at its 2007 plenary meeting 
decided that the Working Group should undertake work on security 
rights in intellectual property in response to the need to provide 
specific guidance to States as to the appropriate coordination 
between secured transactions law as reflected in the Guide and 
intellectual property law.  The U.S. delegation was headed by 
Michael Dennis (L/PIL, with Rachel Wallace (EB) serving as the 
alternate head of delegation and Professor Neil Cohen (Brooklyn Law 
School) serving as an expert adviser. 
 
¶2.  (U) The Working Group made good progress at the session and it 
was able to complete a first reading of the entire draft Annex.  At 
the conclusion of the session, the Working Group was of the view 
that it should be able to complete its work on the draft Annex at 
its fall 2009 session or at its early spring 2010 session.  The 
Working Group would then be in a position to submit the Annex to the 
Commission for final approval and adoption at its 2010 session. 
Several controversial issues remain to be resolved. 
 
¶3.  (U) The most problematic issue concerns the treatment of 
licensees in the ordinary course.  Consistent with the Guide and 
U.S. law, the draft annex provided that non-exclusive licensees who 
obtain licenses in the ordinary course of business, take free of a 
prior security interest created by the licensor.  Nonetheless, IP 
stakeholders and delegates from some of the European countries 
argued that this concept of ordinary course does not exist in IP law 
and therefore has no place in the Annex.  The USDEL suggested that 
the result protecting mass market consumer licenses was more 
important than the formulation of the legal rule and that the Annex 
might simply state that:  "The law should provide that a 
non-exclusive licensee (that obtains its license in a mass-market 
transaction available to all) from a rights holder who has 
previously granted a security right in the licensed intellectual 
property may enjoy its rights notwithstanding the security right so 
long as the licensee fulfills all of its obligations on the license 
contract."  The IP stakeholders and some states, however, continued 
to oppose even this limited formulation of the rule. 
 
¶4.  (U) Another difficult conceptual issue concerned the choice of 
law for security rights in intellectual property.  Two alternate 
rules remain under consideration.  U.S. IP stakeholders, along with 
the European member states, argue that the lex protectionis 
(following IP law of the state which created the IP property right) 
would provide the best result.    Other states, such as Canada, 
argue that the law of the grantor's location (the general rule for 
intangibles under the Guide) would provide for a best result since 
it would result in the application of a single law to the creation, 
third-party effectiveness, priority and enforcement of a security 
right. 
 
¶5.  (U) Another unresolved issue concerns the impact of insolvency 
on a security right in intellectual property.  The USDEL offered two 
proposals concerning the issue which were adopted by the Working 
Group and included in the report of the session.  The Working Group 
VI further decided that these proposals should be referred to 
Working Group V (insolvency) and that, subject to further 
consideration by both working groups, the proposals should be 
included in the draft Annex.  The WG VI also agreed that the fall 
2009 sessions of Working Groups V and VI should be scheduled in a 
way that would make possible the holding of a joint session, should 
such a joint session prove to be necessary. 
 
SCHULTE