BILL ANALYSIS
AB 224
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 224 (Portantino)
As Amended September 1, 2009
2/3 vote. Urgency
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|ASSEMBLY: | |(April 20, |SENATE: |40-0 |(September 4, |
| | |2009) | | |2009) |
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(vote not relevant)
Original Committee Reference: HIGHER ED.
SUMMARY : Extends a sunset date for a provision of the Uniform
Commercial Code (UCC). Specifically, this bill :
1)Extends, until January 1, 2013, the sunset date of a provision
of the UCC which provides that a licensee in ordinary course
of business takes its rights under a nonexclusive license free
of a security interest in the intangible property created by
the licensor and takes its leasehold interest free of a
security interest in the goods created by the lessor.
2)Contains an urgency clause, allowing this bill to take effect
immediately upon enactment.
The Senate amendments delete the Assembly version of this bill,
and instead extend the sunset mentioned above.
EXISTING LAW provides that a licensee in ordinary course of
business takes its rights under a nonexclusive license free of a
security interest in the general intangible created by the
licensor, even if the security interest is perfected and the
licensee knows of its existence. This provision, as well as a
definition of "licensee in ordinary course of business" sunsets
on January 1, 2010.
AS PASSED BY THE ASSEMBLY , this bill dealt with postsecondary
education.
FISCAL EFFECT : None
COMMENTS : Existing law provides that a licensee in ordinary
course of business takes its rights under a nonexclusive license
free of a security interest in the intangible property created
AB 224
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by the licensor and takes its leasehold interest free of a
security interest in the goods created by the lessor, as
specified. This provision of the UCC is scheduled to sunset on
January 1, 2010. This urgency bill would extend the sunset date
of that provision to January 1, 2013.
Article 9 of the UCC covers security interests in personal
property. It was rewritten and modernized by the Uniform Law
Commission (ULC, formerly the National Conference of
Commissioners on Uniform State Laws) in the late 1990s and in
the process the ULC addressed security interests in general
intangible property (such as intellectual property). Every
state has adopted Article 9 as revised, and it became effective
in California on July 1, 2001.
The 1999 revisions to Article 9 of the UCC created rights for
licensees of general intangibles such as intellectual property
comparable to the rights of buyers of goods in the ordinary
course of business. (UCC Section 9321.) When California was
considering adoption of the revised Article 9 of the UCC, the
Directors Guild of America and the Screen Actors Guild expressed
concerns about how the proposed revision to Section 9321 would
affect their operations. According to these groups, exclusive
licenses granted to investors and others who may have perfected
security interests or rights to proceeds from a film production
(employees, for example) may end up with diminished rights to
security interests in the goods (the film) that may be asserted
by nonexclusive licensees (for example, DVD rental stores).
While the ULC assured them at the time that the then-proposed
language of Section 9321 would not have a negative impact in
practice, the groups asked for time to evaluate the impact of
the new Section 9321 on their actual operations. The
Legislature agreed to then limit the operative effect of the new
Section 9321 to a sunset date of January 1, 2004, which was
subsequently extended twice, to January 1, 2007 and finally to
January 1, 2010.
The sponsor of AB 224, the Directors Guild of America, Inc.,
believes that another sunset extension is necessary to maintain
the status quo regarding Section 9321. According to both the
UCL and the sponsors of this bill, the extension is also
necessary in order to allow the involved parties to evaluate the
effect of Section 9321 on exclusive and nonexclusive licensees
in the context of existing and continually evolving technology
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to deliver goods (such as "streaming media to cell phones").
Analysis Prepared by : Leora Gershenzon / JUD. / (916)
319-2334
FN: 0002757