Intellectual Property As Collateral: Reconciling Proprietary Rights And Security Interests Under Indian Law

Abstract

Indian businesses increasingly hold value in patents, trademarks, copyright, designs, software, trade secrets, and associated licensing streams rather than in land or machinery. Yet intellectual property (IP) remains an underused form of loan collateral. Indian scholarship identifies a paradox: existing legislation can accommodate the transfer of IP and the treatment of knowledge capital as an asset, but no integrated regime clearly resolves creation, perfection, priority, valuation, enforcement, licensing, and insolvency. The result is a gap between formal proprietary capacity and practical creditability. This article argues that Indian law should not treat IP collateral as an ordinary pledge of documents or as an unqualified transfer of ownership. It should recognize a functional security interest over defined economic rights, supported by coordinated registry practice, asset-specific perfection rules, standardized valuation, transparent enforcement, and insolvency procedures that preserve going-concern value. The article distinguishes patents, trademarks, copyright, and royalty streams; examines the interaction among the SARFAESI Act, 2002, the Companies Act, 2013, IP legislation, and the Insolvency and Bankruptcy Code, 2016; and proposes a reform architecture that protects lenders without allowing enforcement to destroy innovation, goodwill, licensee reliance, or authors’ non-economic interests.