Nguyen on IP as Collateral and the Fed. Cir.'s Overreach into Commercial Law

Xuan-Thao Nguyen (Indiana McKinney) has posted two just-published articles on the role of IP in secured transactions. The first is Financing Innovation: Legal Development of Intellectual Property as Security in Financing, 1845-2014, which describes the development of the use of IP in chattel mortgages, including recent Federal Circuit decisions on whether a secured party of IP collateral becomes the owner after default. She argues that despite new financing mechanisms, small businesses have been struggling to access financing for innovation, and that more attention to this issue is necessary to help the United States maintain its innovative edge. (As Daniel Hemel and I point out in Beyond the Patents-Prizes Debate, one of the main downsides of ex post rewards like patents and prizes over ex ante rewards like grants and R&D tax credits is that ex post rewards require innovators to obtain financing to cover early R&D costs.) In her conclusion, Nguyen notes that "China has embraced a competitive strategy to increase innovation by providing financing based on the intellectual property assets of the business," though she notes that the details of Chinese IP financing is beyond the scope of her current project.

Nguyen's second new article is In the Name of Patent Stewardship: The Federal Circuit's Overreach into Commercial Law, which has harsh words for the Federal Circuit's recent cases on secured transactions and other commercial law issues affecting IP. Here is the abstract:

While the U.S. Court of Appeals for the Federal Circuit has admirably commandeered its stewardship of patent law—Congress bestowed the Federal Circuit with exclusive jurisdiction over patent appeals since 1982—the court has unabashedly extended its reach, unwelcomed, into commercial law. Camouflaged in the name of patent stewardship, the Federal Circuit’s foray into commercial law has yielded unexpected and unjustifiable results. This Article argues that, paradoxically, to maintain its stewardship of patent law, the Federal Circuit should not invoke patent law to rationalize its decisions concerning commercial law, which have dramatically altered established commercial law. This encroachment into commercial law, which is within the provenance of state law, destabilizes federalism causing uncertainty in state law. The Federal Circuit must refrain from encroaching into commercial law as it has no authority to inject itself into state law making.

I haven't delved into these cases in any depth, but I'd be curious to hear the thoughts of other commercial law scholars on these issues.