## Facts

- Cybernetic Services, Inc. owned a patent relating to a video-signal data recorder and the patent was the estate’s principal asset.
- Matsco, Inc. and Matsco Financial Corporation took a security interest in the patent.
- The creditors filed a financing statement with the California Secretary of State in compliance with California’s UCC Article 9, but did not record the security interest with the U.S. Patent and Trademark Office (PTO).
- Creditors filed an involuntary Chapter 7 petition; an order for relief was entered and a Chapter 7 trustee was appointed.
- The secured creditors sought relief from the automatic stay to foreclose on the patent.
- The trustee objected, asserting the security interest was unperfected as against the trustee’s lien-creditor status because it was not recorded with the PTO.
- The bankruptcy court ruled the security interest was perfected under Article 9 and had priority over the trustee; the Bankruptcy Appellate Panel affirmed.

## Issues

1. Whether 35 U.S.C. § 261 or California UCC Article 9 requires recordation of a patent security interest with the PTO to perfect the interest against a subsequent lien creditor, including a bankruptcy trustee exercising § 544(a) powers.

## Decision

- The Ninth Circuit affirmed.
- A security interest in a patent is perfected, as against a subsequent lien creditor, by complying with state Article 9 filing requirements.
- Neither 35 U.S.C. § 261 nor Article 9 requires PTO recordation to perfect a non-ownership security interest in a patent.
- Because the creditors perfected before the bankruptcy filing, their interest had priority over the trustee’s hypothetical lien creditor status, supporting relief from the automatic stay.

## Legal Principles

- 35 U.S.C. § 261’s PTO recordation regime applies to “assignments, grants, or conveyances” that transfer ownership interests in patents; it does not establish a perfection system for non-ownership security interests.
- The § 261 protection for recorded interests runs against later “subsequent purchasers or mortgagees” of ownership interests, not against a bankruptcy trustee as a lien creditor.
- Under state UCC Article 9, patents are treated as general intangibles; perfection typically occurs through filing a financing statement in the state’s central filing office.
- State commercial-law perfection rules are displaced only where federal law supplies a competing, mandatory perfection and priority system; the Patent Act does not do so for patent security interests.

## Conclusion

The court held that a creditor can perfect a security interest in a patent by filing under state UCC Article 9, and failure to record the security interest with the PTO does not render it unperfected against a bankruptcy trustee acting as a hypothetical lien creditor.


In re Cybernetic Servs., Inc., 252 F.3d 1039 (9th Cir. 2001)