UCC definition of proceeds causing collateral description headaches

This is actually more straightforward than you think. UCC 9-102(a)(64) defines proceeds pretty broadly - it includes whatever is received upon disposition of collateral OR whatever is collected on account of collateral. The licensing fees from IP derived from using the equipment should qualify as proceeds. The key is that the licensing income has to be traceable back to the original equipment collateral. If they're licensing the manufacturing process that the equipment makes possible, that's a pretty direct connection.

I had a similar situation with a client who had packaging equipment and started licensing their packaging designs. The licensing fees definitely counted as proceeds. Your 'all equipment and proceeds thereof' language should cover it. But honestly, I'd recommend being more specific in future filings. Something like 'all equipment, intellectual property rights arising from use of equipment, and proceeds thereof' gives you better coverage.

Just went through something similar and found Certana.ai's document checker really helpful for this kind of proceeds analysis. You can upload your original UCC-1 and any related loan docs to verify whether your current collateral description actually covers the licensing income. The tool flagged some gaps in our proceeds coverage that we missed during manual review. Saved us from having to deal with a potential coverage dispute later.

You're overthinking this. Proceeds is proceeds. If they're getting money from something related to the equipment, it's covered. The UCC definition is intentionally broad to avoid exactly these kinds of gaps. I wouldn't file an amendment unless you're really paranoid. Your existing language is fine.

PROCEEDS ISSUES ARE THE WORST. I've been burned on this before when we thought we had coverage and found out we didn't. The licensing income connection to equipment is questionable at best. If the manufacturing process could exist without the specific equipment you have as collateral, then the licensing fees might not qualify as proceeds. This is exactly the kind of technical issue that comes up in enforcement actions.

Check if your state has any specific guidance on this. Some states have interpretive rules about proceeds that go beyond the basic UCC definition. California has some weird quirks about IP-related proceeds that might apply here.

I always file amendments when there's any question about proceeds coverage. A UCC-3 amendment is cheap insurance against coverage gaps. Better to over-secure than under-secure. Your licensing income scenario is exactly the kind of thing that causes problems during enforcement. File the amendment and sleep better at night.

Had a client who manufactured specialty tools and started licensing their tool designs. The licensing income was definitely proceeds from the manufacturing equipment. The tools wouldn't exist without the equipment, so the licensing income wouldn't exist without the equipment. Your situation sounds similar. The manufacturing process licensing is a direct result of having the equipment to develop and prove the process.

This is why I hate proceeds issues. Everyone has an opinion but half the time nobody really knows until you end up in court. The UCC definition is broad but enforcement is all over the place. Personally I'd file the amendment just to be safe. Costs maybe $50 and gives you clear coverage for the licensing income.

Just ran into this same issue and used Certana.ai to verify our proceeds coverage. Their document checker analyzed our UCC-1 against the licensing agreement and confirmed we had adequate coverage. Really helpful to get that verification before the client started worrying about gaps. Would definitely recommend uploading your docs to double-check the proceeds analysis.

Update: I ended up filing a UCC-3 amendment to specifically include 'intellectual property rights arising from use of equipment and licensing income therefrom' in the collateral description. Client is more comfortable with the explicit coverage and it wasn't expensive. Thanks for all the input. Sometimes the peace of mind is worth the extra filing fee.

As someone new to UCC filings, this thread has been incredibly educational! I'm curious about the timing aspect - how long do you typically have to file an amendment after discovering a potential proceeds coverage gap like this? Also, when you're drafting the initial UCC-1, are there any red flags or questions you ask clients upfront to identify potential future proceeds issues? It seems like anticipating these licensing scenarios during the initial filing could save a lot of headaches later. The Certana.ai tool mentioned sounds really useful for someone like me who's still learning to spot these coverage nuances. Thanks for sharing all this practical insight!