Patents are personal property, just like your car. Can your creditors foreclose on your patent? If you use your patent as collateral for a loan or create any other security interest in the patent and then default on the underlying obligation, the person holding the security interest in the patent can foreclose on the patent under state law and thereby acquire all rights in the patent.
The Federal Circuit Court of Appeals recently decided the case of Sky Technologies v SAP AG. In that case, a defendant in a patent infringement case argued that the plaintiff did not have the right to enforce the patent because the plaintiff acquired its ownership of the patent through a foreclosure sale, rather than by assignment. The Federal Circuit held that the person who acquired the rights in the foreclosure sale had the right to enforce the patent.
In short, a patent can have real value as collateral for a loan because a purchaser at a foreclosure sale can enforce the patent.
— Robert J. Yarbrough, Esq.