Lenders are urging Congress to pass legislation that would treat intellectual property the same way other assets are handled by bankruptcy courts.

Secured lenders normally establish their right to a defaulted borrower's tangible or intangible assets before unsecured creditors by making a state filing under the Uniform Commercial Code. But some bankruptcy courts have recently ruled that lenders must go through a more complicated federal filing process when the assets are intellectual material such as software programs.

Industry groups last week complained in a letter to Rep. Howard Coble, the chairman of House Judiciary's intellectual property subcommittee, that filings under the U.S. Copyright Act take longer and require constant updating. That system makes it harder to track whether other lenders have similar claims, the letter said, and would provide no guarantees to intellectual property that has not been copyrighted.

"These fundamental problems and difficulties frustrate financing and create unnecessary risks, which decrease the availability of cost-effective financing for software developers and similar creators of intellectual property," the American Bankers Association, Commercial Finance Association, and the Financial Services Roundtable wrote last week. -

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