Also known as: perfecting a security interest · perfected a security interest · perfection of a security interest · perfection · UCC perfection
Written by attorneys · grounded in primary & secondary sources — see below
A series of steps taken by a secured party to render its security interest effective against third parties claiming an interest in the same collateral. The steps typically include filing a financing statement or taking possession of the collateral when required by statute.
Platinum Partners assigned a promissory note secured by a mortgage on commercial property to Prism Analytics to secure a separate loan. Prism Analytics filed a financing statement in the appropriate state office describing the note and mortgage. When the original borrower defaulted, Prism Analytics asserted its rights to enforce the mortgage against competing claimants.
Personal Dating Services granted Together Dev. Corp. a security interest in its federally registered trademark to secure repayment of a loan. Together Dev. Corp. filed a financing statement under state law rather than recording the interest with the USPTO. When Personal Dating Services entered bankruptcy, Together Dev. Corp. claimed its state filing had perfected the interest against other creditors.
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The transferee must take the steps prescribed by UCC Article 9, most commonly by filing a financing statement that identifies the obligation and mortgage. The Restatement notes that these steps keep the mortgage and enforcement rights together and prevent the obligation from becoming unsecured in practice.
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Case law holds that the Lanham Act does not govern security interests in trademarks, so state UCC filing remains the proper method for perfection. The federal statute addresses only recordation of outright assignments, leaving security interests subject to Article 9.
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Without perfection the mortgage and the right to enforce the obligation can become separated, leaving the note unsecured as a practical matter. The Restatement treats this separation as economically wasteful and therefore directs that the mortgage travel with the obligation unless the parties expressly agree otherwise.
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