Collateral Stumpers—When Filing Under the UCC May Not Be Sufficient

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Annie: Hello, everyone, and welcome to today's webinar, "Collateral Stumpers: When Filing Under the UCC May Not Be Sufficient." My name is Annie Triboletti, and I will be your moderator.

So joining me today is Paul Hodnefield. Paul is the associate general counsel for CSC, where he's responsible for advising the company regarding real estate recording, notary, Uniform Commercial Code, and other public record transaction services. So with that, I'd like to welcome Paul.

Paul: Thank you, Annie. Yeah, in my role at CSC, I'm designated as the subject matter resource for all things related to the UCC and other transactional services that we provide. So I get a lot of questions from a lot of different sources about the filing and search process. And one of the areas that generates an awful lot of questions is special types of collateral that either intuitively seems it would be that security interests in such collateral be perfected under a law other than Article 9, or that there is some question involved as to what the law requires for perfection.

So what I'm going to do today is I'm going to address a lot of these types of questions that come up. Specifically what I'm going to do I'll begin with an introduction and an overview of the perfection rules under Article 9 and most importantly the exceptions to those perfection rules. And then I'm going to move on and talk about the types of collateral that raise the most questions. These include intellectual property, domain names, and highly movable goods, planes, trains, and automobiles, and so forth.

So I'll begin within with an overview and introduction to the perfection rules under Article 9. The most important thing to understand about Article 9 is that the general rule is that the secured party must file a financing statement to perfect a security interest in all types of personal property. That's a general rule. And then there are exceptions to that rule, and they are provided within Article 9. There are certain situations where there's automatic perfection upon attachment. Sometimes a secured party can perfect by taking possession of the collateral. And finally, there are times where the secured party can perfect by taking control of the collateral. And in some cases, there are different methods available for the same collateral. One secured party might perfect by possession. Another might perfect by filing. And there are priority rules for sorting out who has the priority based on the type of perfection.

But then there are other goods that Article 9 says security interest in such goods must be perfected under law other than Article 9. These include goods that are subject to a certificate of title, primarily motor vehicles, but there could be other types of goods subject to a certificate of title as well. And then there are security interests and goods where federal law preempts UCC Article 9 with regard to the method of perfection. This could be by statute. It could be by federal regulation. It could even be by treaty. And in fact all of these can apply depending on the types of goods involved.

So that raises the issue of when does federal law preempt Article 9. Well, for purposes of this presentation, it's when the federal statute, regulation, or treaty establishes requirements for perfection, specifically for a security interest to obtain priority over the rights of a lien creditor with respect to the collateral. It doesn't have to say "perfect," but that's really what it means.

There are a couple different types of preemption that the courts recognize. There's express preemption, and this is where Congress in the legislation says it is our intention to preempt all state laws to the contrary. That's pretty clear in most cases. But then there is the implied preemption, and there are two different types of implied preemption. One is where it appears to the court that Congress has intended to occupy the entire space. And then the other is where a federal and state law directly conflict and it's impossible to comply with both.

Now when federal law preempts Article 9, Article 9 will defer to the federal law, but only to the extent it must. In other words, if federal law establishes the requirements for perfection of a security interest but not priority, Article 9 will step back, allow the federal law to establish the perfection, but then Article 9 will apply to the priority. So Article 9 is kind of jealous of its territory and will not step back any further than necessary to the extent that federal law preempts it.

So when law other than Article 9 governs perfection of a security interest, it is necessary for the secured party to comply with the other law because in that case filing under Article 9 will not be effective or sufficient to perfect the security interest. And so that compliance is going to be necessary if the secured party wants to obtain priority over the rights of a lien creditor. And from the Article 9 perspective, under Article 9, compliance with the other law is deemed the equivalent of filing a financing statement. So if somebody perfects by a method provided under federal law, there the time of perfection might apply for determining priority under Article 9 as if it had been the filing of a financing statement.

So with those basics out of the way, now let's move on and discuss some of the challenges that are out there with certain types of property. And intellectual property is a big one, and that's because patents, trademarks, copyrights, these are all creatures of federal law. Federal law establishes the right to a patent. Federal law establishes . . . well, there's state trademark law as well, but federal trademark law. Copyright law is entirely within the bounds of the federal government to legislate and regulate. And so it would seem that these types of intellectual property would all require perfection under federal law, and indeed the U.S. Patent and Trademark Office and the Copyright Office both have registries, and they will allow the filing of security interests in patents, trademarks, and copyrights. So it would seem intuitively or at least it makes common sense that one would file at the U.S. Patent and Trademark Office.

Well, let's take a look at how the law works. Let's start with patents. As I said, there is a registration system that's established under the Patent Act, and it's maintained by the U.S. Patent and Trademark Office. If we look at preemption analysis however, the mere existence of a registration system doesn't mean that federal law preempts. The registration system under the Patent Act is primarily to register ownership and transfers or assignments of patents.

And in the first case I have cited here, Cybernetic Services, what happened was a secured party took a security interest in a patent and filed a UCC financing statement. Later the debtor filed for bankruptcy, and the secured party moved the court for relief from the stay so it could foreclose on the patent. The trustee objected and claimed that because the secured party only filed a UCC and did not register anything with the U.S. Patent and Trademark Office, that they weren't perfected because they didn't perfect under federal law.

Well, the court took a look at this, and the court determined that a security interest in a patent does not involve a transfer of rights of ownership. It's not an assignment, grant, or conveyance within the meaning of the Patent Act. Because the Act only provides for the assignment, grant, or conveyance that those types of interests shall be void as against subsequent purchasers or mortgages unless registered, only transfers of ownership interest need to be recorded at the Patent and Trademark Office. Because a security interest is not a transfer of an ownership interest by itself, the court said that it doesn't need to be registered with the Patent and Trademark Office, and therefore perfection under the UCC is perfectly acceptable. The federal law does not preempt.

In another case, Coldwave Systems, what happened there was the creditor did file with the Patent and Trademark Office, but didn't file a UCC until 90 days before the debtor filed for bankruptcy. It did file the UCC within that 90-day preference period and what was quite a time after the security interest was established. And here, again the secured party tried to assert that it had filed with the Patent Office and the UCC was just formality. But the court said, no, the Patent Office filing of a security interest doesn't perfect the security interest, and because the UCC was filed within the 90 days, it was preference and the trustee was allowed to avoid it.

So what does this all add up to? Well, bottom line is that the Patent Act applies only to ownership interests, and therefore perfection of a security interest in a patent has to be done through filing a UCC record. Now, if you go to the U.S. Patent and Trademark Office website, you will see that when filing an interest, there is opportunity to indicate the conveyance type, and there are security interest, releases, mortgage, lien, all of these. However, these are not effective to perfect a security interest. All they do is they're kind of just mere notice filings that have no legal effect. They just simply don't perfect the security interest.

So when dealing with patents for perfection, the best practice is perfect the security interest by filing a financing statement. It should be filed in the location of the debtor under Section 9-307. A patent is really just a general intangible, so the collateral should cover patents, general intangibles, or it can specifically describe the patent. And it should also include any other assets and after-acquired property related to the patent.

If somebody wants to take a belt and suspenders approach, they can also file the security agreement with the U.S. Patent and Trademark Office. It won't perfect anything. It is commonly done however.

As far as searching goes, obviously a patent search or a search for a security interest in a patent needs to be done in the UCC records like any other UCC search. And it might be a good idea to also look at the USPTO and see if there's something there because it might identify potential claims that got missed on a UCC search.

Next we'll take a look at trademarks. Trademarks are very similar to patents in that they're governed by the federal government. There is a registration system, under the Lanham Act, for trademarks. It's maintained again by the U.S. Patent and Trademark Office.

The leading case on this is still, from 1984, called Roman Cleanser. And what happened here, with Roman Cleanser, is a secured creditor made a loan to the debtor and included general intangibles. I don't recall if they specifically mentioned the trademark at issue. But the debtor filed for bankruptcy, and the trustee tried to avoid the lender's security interest to foreclose or so that it could sell the trademark. And the trustee claimed that the lender had to file a conditional assignment with the U.S. Patent and Trademark Office.

But the court found that the applicable federal law applied to assignments, but said assignments are not security interests, and therefore it didn't apply to security interests. And since it's not an assignment, a perfection of a security interest is not governed by federal law and it must be perfected under state law UCC. So that's what the court ruled, and as a result, the secured party won that case.

And again, just like the Patent Office or the Patent Registry, the Trademark Registry also allows the filing of security interests, security agreements, liens, and mortgages on trademarks, but generally those are not going to be effective just like a patent. So best practice for perfection, file a UCC financing statement that covers the trademarks. Also general intangibles will cover trademarks. It's filed in the location of the debtor and should describe any rights or after-acquired property related to the trademark.

And again, as a belt and suspenders approach, the secured party can file with the Patent and Trademark Office. It may not be effective. But again, it is commonly done, and it just makes it easier for somebody searching, I guess, to find the claimed interest even if they're not looking in the right place.

When searching, of course it's mandatory to search UCC records for a security interest in a trademark. And bear in mind that Article 9 is very generous for how a secured party can describe collateral. And a trademark might be described specifically. It could be just trademarks. It could be general intangibles. So read the collateral broadly. And again, it doesn't hurt to also search at the U.S. Patent and Trademark Office to see if there's anybody else out there with a claim that maybe didn't file in the right location or where the UCC was missed as part of the search.

Now we get into copyrights. This gets a little bit more complex because there are two types of copyrights. There's registered copyrights and unregistered copyrights. There is a registration system. This is established under the Copyright Act. It's maintained under the authority of the Library of Congress, where the U.S. Copyright Office is located.

The case that I cite here for the preemption analysis, Aerocon Engineering v. Silicon Valley Bank, what happened here was that the debtors owned copyrights in certain drawings, technical manuals, blueprints, and computer software, but they were not registered with the Copyright Office. They had a copyright in them, but it was an unregistered copyright. The bank perfected its security interest by filing a UCC financing statement that covered its security interest in the collateral, including copyrights, and it filed the financing statements with the California Secretary of State, where the debtor was located. Later the debtors filed for bankruptcy, and the trustee sold all the assets to Aerocon, along with the right to avoid the bank's security interest.

The issue before the court was whether state law or federal law governed perfection of the security interest in the unregistered copyright. Well, the court took a look at this situation, and it determined that, yes, the Copyright Act does preempt Article 9 for registered copyrights. It provides for perfection and priority of security interests in registered copyrights. However, in this case, the collateral at issue were unregistered copyrights. And because they were unregistered, the court took a look and found there was nothing that the secured party could file because the only way to file a security interest or other document in the registration system at the Copyright Office is to tie it to the registration of the related work. And without a registration, there's nothing to hang a related filing on, and therefore there was nothing that the secured party could file.

So the court determined that the Copyright Act does not preempt Article 9 for perfection of a security interest in unregistered copyrights. And the court went on to say that Congress chose not to create a federal scheme for security interests in unregistered copyrights, and it can go ahead and do so if it so chooses at a later time. But for now, you perfect under the UCC, not under the federal Copyright Act if it is an unregistered copyright.

And frankly, most copyrights are unregistered. Every document that's created, every document you create at work, everything is copyrighted. It's all subject to copyright. The difference between registration and not registering is that there are much more, I guess, powerful remedies available for a registered copyright than infringement of an unregistered copyright. But copyrights don't have to be registered. So this leaves a gap. Either the secured party can register the copyright, or they can perfect under the UCC. If they couldn't perfect under the UCC, they'd have no method of taking a security interest in an unregistered copyright.

So the best practices for registered copyrights, it is necessary to register the security interest with the U.S. Copyright Office. That's the only way to perfect a security interest in a registered copyright. And conducting a search for registered copyright, again only in the Copyright Office. That's the only place that it should be found.

For unregistered copyrights, perfection requires filing a UCC financing statement. There's nothing that can be filed at the Copyright Office to record that security interest and make it retrievable because simply there's no original record. It'd be like trying to file an amendment to a financing statement that didn't exist.

If the copyright is particularly valuable, it might not be a bad idea to have the copyright holder register the work before taking the security interest so that there is a certain way to do it under federal law. But that's something the lender can take up with the debtor.

When conducting a search for unregistered copyrights, it means conducting a UCC search. The unregistered copyright would be a general intangible, but it could also be specifically described by the name of the work or the copyright, interests, things like that. So again, read the collateral broadly and search accordingly.

I'm often asked about domain names. Domain names, of course, are the identifier of a website typically in plain language, such as cscglobal.com or pets.com or something like that. Domain names can have substantial value because of their identification with a company or product.

But the question is: What is a domain name? It has some things in common with intellectual property, but in one sense it's more like a telephone number. I mean, can you grant a security interest in your telephone number? Maybe. But I guess the big question is: What kind of property is a domain name?

Well, the courts agree that a domain name is a type of personal property. It's just what kind. There has been a split. Some courts say it's a contract right. Others say it's a type of intellectual property. It's really kind of both because, like a telephone number, the holder of a domain name only has the right to use it according to the contract that they have with the domain name registry.

There is a registration system for domain names. It's maintained by ICANN, the International Corporation for Assigned Names and Numbers. And it's organized through independent registrars. For example, CSC is a domain name registrar and one of the largest commercial domain name registrars in the U.S. So the registrars are the ones that sell the right to use the domain names and the registration. And the rights of the holder of the domain name are determined by the contract with the registrar. So it's a contractual right to use. Once the domain name is registered, then it associates the domain name with a particular computer, typically a server somewhere. But it does not establish any type of registry for the purposes of filing documents related to it.

The registration system is not under federal law. There's no preemption issue, and there's no way that the registration system can be used to file financing statements or the equivalent of that. So there really isn't anywhere to file, other than under the UCC.

But there are special risks with domain names because, like telephone numbers, they can they can expire. If the debtor fails to pay its bill or fails to renew its registration, it goes away. And they can be snapped up in a heartbeat by bots out there that are designed to take expired registrations and seize them, and essentially they can ransom them or resell them at a higher value.

There's sometimes unauthorized transfer. A debtor may sell or assign the registration to another party outside or without the secured party's knowledge. Whether such a transfer in the face of a financing statement is effective or not is an open question. There have been cases of theft of domain names and cybersquatting, where people register the name with other extensions and can dilute the value of a domain name.

So there are special risks here. So what are the best practices when perfecting a security interest in a domain name? First thing is to perfect, and that requires filing a UCC financing statement. There's really no way around that. It has to be a UCC financing statement, and again it can specifically describe the domain names, domain names in general, or it can describe general intangibles. So the only way to perfect the security interest at this time is by filing a financing statement like any other financing statement in the location of the debtor.

Control can be used but not to perfect a security interest. But it can be used to protect the security interest. And here, the debtor can assign the registration to the secured party so the secured party can maintain the registration and keep it from being transferred, protect against some of those online risks.

And for searching, it's just a normal UCC search. Search for any financing statement that covers general intangibles, domain names, or specific descriptions of the domain name or trademarks that are close to the domain name, also a good idea to take a look at those.

So that's the scoop on intellectual property. For the most part, with the exception of registered copyrights, security interests in intellectual property are perfected by filing a UCC financing statement.

Now I want to move on and talk about highly mobile goods. These include aircraft, rolling stock, and of course titled goods, automobiles, and things that float, boats, vessels, and so forth. So let's take a look at some of these.

We'll start with aircraft. There is a domestic registry for aircraft established by the FAA. It's located in Oklahoma City. As far as preemption goes, state law may determine priorities, but under federal case law, all interests in civilian aircraft must be federally recorded before they can obtain the priority that they are entitled to under state law. In other words, a security interest in civilian aircraft must be recorded with the FAA. Once that's done, it's essentially the equivalent of a financing statement, and then the UCC priority rules kick. A case there was Philko Aviation. That goes back to 1983. But there may still be situations in which security interests or another lien does not require registration, and I'll explain that in a minute.

In addition to the domestic registration with the FAA, there's an international registry, the International Registry of Mobile Assets or IRMA. It was established by the Cape Town Treaty, and the U.S. ratified the treaty and it took effect in 2006. So this registry, which is located in Ireland and is maintained by a company called Aviareto Limited, exists for certain aircraft interests, and I'll explain that that in a little more detail in a couple of minutes.

First of all, the FAA registration, it's required for conveyances that effect an interest in civilian aircraft. These include ownership interests, security interests, and liens. It applies to leases and security interests, in addition to aircraft, to certain aircraft engines, propeller or jet engines rated over a certain horsepower. It relates to propellers rated over a certain horsepower. It applies to parts for use by an air carrier holding an operating certificate and certain spare parts. So for more specific details, of course, you'd have to take a look at the statute. But not everything is covered when it comes to parts, but certain key components, engines, propellers, jet engines, and other appliances can be covered by this act.

There is maybe a limited exception to the registration requirement that the court addressed in Southern Air Transport. This was a Sixth Circuit case from 2007. What happened was, in Southern Air, the creditor was actually a repair company, and they performed certain work on an aircraft. And they retained possession of the aircraft until the debtor paid the costs of that. The debtor paid, but then immediately declared bankruptcy afterwards. And the trustee sought to recover the payment.

The court held that, no, the artisan's lien under which the creditor retained the aircraft didn't require filing of any type, and because no filing was required, there was nothing that needed to be recorded with the FAA registry. Now these facts arose prior to ratification of the Cape Town Treaty, and so it's not clear whether they would have also had to register internationally even if there was no FAA registration.

But there have been other cases where somebody asserting a similar lien in a different state lost because in that state there was a filing required at I believe it was the county where the property was located. And because there was a filing requirement, the court said there also was a filing requirement with the FAA. But in this case, there was no filing requirement.

Bottom line, I would assume that there is a registration requirement with the FAA unless there is a very specific exception. And generally, the courts are not very interested in granting exceptions to the federal preemption with respect to aircraft.

Now when filing with the FAA, there's no specific form required, at least last time I checked. However, they do have some optional forms available on the website. Essentially it's the same . . . all that has to be filed is something very similar to a security agreement. The collateral description, however, does need to be a little more specific, at least for the aircraft. That includes the manufacturer, model, serial number, and the N-number or the tail number. And then spare parts can be described more generally using the address of the debtor.

Searches can be conducted through the FAA, but the online search is somewhat limited. So it's usually a good idea to search on-site, to have somebody go in there and go through the records and get the full details.

Now there's also, as I said, an international registry. It's required for international interests, which includes security interests, lessor's interest, and conditional sale or reservation of title, which the UCC considers a security interest. In aircraft objects, aircraft objects include large airframes rated over eight passengers or a certain weight, certain aircraft engines, and helicopters. Filing under the International Registry is not required for certain parts, propellers, and spare engines and things.

When it comes to the international registration, there's no document that gets filed. It's all electronic, over the internet. There's no forms. The data is entered through the website. Users have to sign up to be able to register. Although searches are available without registration. Or they may they may require registration now to run searches. The requirements for registration, manufacturer, model number, and serial number, and an FAA authorization code, which I'll explain in a moment. Searches are available at the International Registry website.

Now the FAA and the International Registry interact. If you look at the world of assets that must be filed with the FAA, that require registration of a security interest with the FAA, the assets that require registration with the International Registry are a subset of that. So not everything that gets registered with the FAA has to be registered with the International Registry.

But the FAA is an entry point for filing with the International Registry. The way it works is that when somebody files with the FAA, they're issued an authorization code if the registration is required with the International Registry. And then the user can take that authorization code and file it with the International Registry. They use that to get into the International Registry to make their filing I should say.

And if it's a prospective interest, meaning that they're pre-filing the security interest with IRMA, then there is a form that can be filed to obtain an authorization, and I believe it's filed with the FAA and then they will issue an authorization code for the International Registry. And then the secured party can register with the International Registry, and that'll be effective as long as they make the required registration with the FAA within 60 days.

Now international registration is required by the Cape Town Treaty because the U.S. has ratified it and it has taken effect. So it's a two-step process if it does require international registration. The FAA is one part of that process. Registration with the International Registry is the other. If the record is registered with the FAA alone, that arguably isn't going to be sufficient to get priority over conflicting security interests that also registered in the International Registry.

So that's aircraft. Another highly mobile asset, trains, railroads, rolling stock, that type of thing. They're highly mobile. They move quickly from state to state. And there is a federal registration system for this. It requires recording of instruments that evidence the interest in many types of railroad assets with the Surface Transportation Board. The Surface Transportation Board maintains the registry.

It expressly preempts state law when it comes to perfection. But the state law, the UCC will control pretty much everything but perfection. But the federal law here does require perfection to be done by filing with the Surface Transportation Board. This applies to railroad cars, locomotives, and other related types of rolling stock. Typically what gets filed is a cover letter saying what is being filed and then perhaps a security agreement or chattel mortgage between the debtor and the secured party.

So that's railroad assets. Property subject to a certificate a title, this is going to be primarily motor vehicles, but it can be other things as well.

So what is a certificate of title specifically? Well, a certificate of title is a certificate where the statute provides that a security interest must be indicated on the certificate as a condition of or result of obtaining priority over the rights of a lien creditor. In other words, if the state certificate of title law requires registration or notation on the title as a condition of getting priority, then Article 9 defers to that state certificate of title law.

What kind of property is subject to a certificate of title? Well, motor vehicles and trailers certainly are. Manufactured homes, depending on the particular state law, may be subject to a certificate of title. Certificates of title are often issued for all-terrain vehicles, snowmobiles, tractors, boats, but it depends on the particular state. And just because a certificate of title is issued or a certificate is issued, I should say, doesn't mean that that state's certificate actually is subject or actually meets the definition of a certificate of title for UCC purposes. I'll come back to that in a minute.

So when property is subject to state certificate of title law, Article 9 does expressly step back when it comes to perfection. Like with motor vehicles, Article 9 of steps back for perfection, and perfection must be done using the certificate of title law. And a financing statement covering the collateral is not necessary or effective to perfect a security interest in goods covered by a certificate a title. Oops, hit the wrong button, sorry.

One case that illustrates this is Malloy v. Wilserv Credit Union. What happened here is the debtor's vehicle was titled by a tribal jurisdiction in Oklahoma, and the tribal certificate of title law allowed the issuance of a certificate of title for a vehicle, and it did allow for notation of the lien on the title. But it did not provide any effect of that notation. Under tribal law, it didn't indicate that it was necessary to obtain priority over the rights of a lien creditor. And because of that, because the tribal law and the notation on the title, while it was permitted, it had no effect, and therefore the court said that it was not a certificate of title in the UCC context, and as a result you could not perfect the lien on the certificate of title. And the secure party was required to file a financing statement, which they did not do.

There are some challenges when dealing with certificates of title. Mainly it's the Department of Motor Vehicles. Their turnaround tends to be slow. There's a lot of non-uniform statutes and practices. It's still largely a paper-based system, although more and more states are enacting electronic certificate of title laws and implementing electronic titling systems. Over time, I think we'll see that the DMV issues ease up a little bit.

But also there aren't a lot of filing references out there for perfection on a certificate a title for people that don't do it on a regular basis. It just all assumes that whoever is doing it has experience doing it. And there's almost no resources out there for titled goods that are not covered by the Department of Motor Vehicles. In other words, when you get into boats and other types of things, it might have a certificate of title, but are not handled by the DMV.

And certificate of title law is not consistent from state to state as far as the types of the goods that are covered. A manufactured home may be subject to a certificate of title in one law but not in another, or in one state but not in another.

So best practices for perfection, make sure to get the proper forms or the electronic equivalent. There's no safe harbor national form, like there is in the UCC. Plan ahead. It can take quite a time for certificate of title work to get processed. Consider outsourcing the work. In some cases, there are companies that specialize in doing motor vehicle title work.

When conducting a search, certificates of title, the physical certificates are not public record. You have to obtain that from the debtor. And they can be issued by states where the debtor isn't even located. It's where the motor vehicle is most used. So keep that in mind as well. Also conduct a UCC search in the location of the debtor. It might be good to turn up conflicting interests even if they weren't perfected the proper way.

One other issue about certificates of title, goods subject to a certificate of title, it may require perfection under the UCC in a very narrow circumstance, and that's where the titled goods are held as inventory by a dealer. So you may have a lender that has a security interest in the used car inventory of an automobile dealer, and the secured party if they go and take possession of the titles and don't file a financing statement, another creditor could be able to get at those vehicles because they weren't perfected under the UCC. So if the titled goods are inventory in the hands of the debtor, it may require the filing of a financing statement. Please keep that in mind, especially in consignment transactions or auctions, that type of thing.

Next up, maritime vessels. There is a registration under federal law for certain vessels. It's designated that the Secretary of Transportation will handle this registration system, and that has been delegated to the Coast Guard's Vessel Documentation Center in Falling Waters, West Virginia. Federal registration is required. It expressly or it impliedly preempts Article 9. The applicable statute establishes recording as a prerequisite for the effectiveness and establishing priority over third parties. So it expressly preempts state statutory lien law. Maritime liens can only arise under the federal law and require registration.

So what kind of vessels need to be filed with the Coast Guard? Well, commercial marine vessels, they have to be registered if it's a documented vessel. A documented vessel is one for which a certificate of documentation is required under federal law, and it has to be over five tons. It has to be wholly owned by eligible owners who are designated by law, and not documented under the laws of a foreign country. And the documentation is mandatory for vessels that are engaged in commerce. It may be optional for private vessels.

As far as filing goes, there are some forms available from the Coast Guard, but no particular format is required. The record simply has to identify the vessel, provide the name and address of the parties involved, the amounts of the obligations, interests, and things. It's a little different than say the UCC notice filing system.

For other types of things, there are other types of movable goods that may not have a title or may not require registration under other laws, and let's take a look at those. Commercial watercraft, such as barges and maybe tugboats, there is a registration for these under the Surface Transportation Board, just like for railroad rolling stock. So where the cutoff is between these types of commercial watercraft and those requiring Coast Guard registration, I'm not going to get too deeply into that. But generally what's required to be registered with the Surface Transportation Board would only be used in inland waters, but that might not always be the case.

So the filing requirements, basically the same thing as for railroad assets. There's a registry for the commercial watercraft that's identical to the registry for the railroad assets, but it is separate.

For recreational boats, like yachts and other types of watercraft, there is some registration requirements for watercraft that are over a certain size. Yachts, if they're over a certain size, may be registered or they may not be registered with the Coast Guard. So you have to address these on a case-by-case basis. In many states, smaller boats like a 16-foot fishing boat or even a 30-foot fishing boat may be subject to a certificate of title law, may not be subject to a title law, and that may require registration under the UCC or perfection under the UCC. So you have pay attention on the particular state's law.

One I've been asked about also are space assets. What about satellites and the like? Well, there isn't a federal registration system for these or even an international registration system right now. The only way to perfect a security interest is really by filing a UCC record. In the future, UNIDROIT has created a protocol for space assets similar to the International Registry of Mobile Assets for aircraft. And it was adopted in 2012, but so far only four countries have signed on to this. And it needs a much larger number before it would take effect. So it's possible in the future that satellites and other space assets, that security interests in these types of property can be perfected through the filing either with the International Registry or with some federal registry. But right now there isn't anything like that.