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)
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|COMMITTEE VOTE: |10-0 |(September 10, |RECOMMENDATION: |concur |
| | |2009) | | |
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(Judiciary)
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
AB 224
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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 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
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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 to deliver goods (such
as "streaming media to cell phones").
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334
FN: 0003124