Article 9 sales of IP and data collateral: running a defensible disposition

How an Article 9 disposition of intangibles works

After a default, Article 9 of the Uniform Commercial Code lets a secured party sell, lease, license or otherwise dispose of its collateral without a court process. The price of that freedom is scrutiny afterward: every aspect of the disposition, including method, manner, time, place and terms, must be commercially reasonable, and the debtor, guarantors and other secured parties are entitled to notice. Intangibles make both tests harder, because code, trademarks and data have no ready market and their value depends on what a buyer can actually take over.

Article 9 is state law. Each state enacts its own version, and the section numbers below follow the official text, so have counsel confirm them against the governing state's enactment.

Prerequisites

• A clear default and acceleration under the loan documents.
• Collateral that covers the assets. The security agreement should reach general intangibles, software, intellectual property, books and records and data, with perfection confirmed. Registered patents, trademarks and copyrights also have federal ownership records, so expect buyers to want recordable assignment documents.
• An ownership map. Separate what the borrower owns from what it only licenses. Copyright ownership can be transferred in whole or in part, and any exclusive right can be transferred and owned separately, under 17 U.S.C. § 201. That cuts both ways: it lets the code and an AI-training license be split between different counterparties, and it means some rights may already have been granted away.
• Access to the data. Data collateral is only worth what someone can export. Without a cooperative borrower or a receiver, the lender may own a security interest in records it cannot reach.
• An experienced sale agent for marketing intangibles, and IP counsel to review the chain of title.

Step by step: running the sale

1. Sort the collateral into three buckets: owned IP (code, trademarks, domains, patents), licensed-in rights (third-party software and subscriptions) and operational records (CRM, tickets, documents, communications).
2. Secure access and preserve. Pay the subscriptions that hold records, export what is at risk and document who controls each account.
3. Choose the structure. A public sale lets the lender bid; a private sale may reach strategic buyers faster. Decide whether the IP is sold in one lot or several, and whether records are licensed on a separate track.
4. Build the data room and marketing plan. Give buyers enough technical and legal information to bid with confidence, and market for long enough to reach the likely buyers.
5. Send the notifications. Counsel prepares notices to the debtor, guarantors and other secured parties with the content the governing statute requires, and confirms the timing safe harbor in that state's enactment.
6. Run the sale and document everything. Keep the marketing list, inquiries, bids and the reasons for accepting the winning bid.
7. Close with transferable documents. Bill of sale, IP assignments in recordable form, domain and account transfers, and delivery of code and records.
8. Apply the proceeds and account for any surplus or deficiency.

Title is the recurring weak point. When the borrower will not sign assignments, the secured party executes the transfer documents itself, often under a power of attorney in the security agreement, and buyers or IP offices may ask what authority supports them. Courts have considered whether ownership of registered IP passes through a state-law foreclosure, and outcomes turn on the facts and the paperwork. A cooperation agreement signed by the borrower before the sale, and IP counsel's review of the chain of title, head off many disputes.

Where a records license fits

Because Article 9 treats a license as a disposition, operational records do not have to be sold with the code to produce value. Support tickets, CRM history, engineering reviews and internal documents can be licensed to AI developers through SourceX while the IP is sold to a strategic buyer. A separately marketed records license can also help document that the lender looked for value in every part of the collateral.

Licensing for AI training is an active policy topic. The US Copyright Office's report on generative AI training, released as a pre-publication version in May 2025, discusses the practicality of licensing approaches for training data. It is a report, not law, but it explains why buyers now ask about rights before anything else.

Two program facts shape the timing. SourceX licenses are typically exclusive for AI training for an agreed term, so disclose any license in the sale notice and data room so IP buyers bid knowing it exists. And the company keeps ownership: the records are licensed, not sold, with one all-in price paid as a one-time payment, typically within about 60 days of invoicing once the buyer selects the data.

Common mistakes

Illustrative example

Illustrative: a fictional field-service scheduling software company, which had 95 full-time employees at its peak, misses payments on its term loan and is declared in default. The borrower signs a cooperation agreement, and the lender runs a public sale of the code, trademarks and domains through an experienced sale agent. In parallel, the borrower introduces its nine years of support tickets, implementation project records and engineering reviews to SourceX, with the lender's consent. The data room discloses the proposed exclusive AI-training license, so bidders for the code price it in. The lender documents each track separately in its file.

How the introduction works

The lender or its advisor makes the introduction; the borrower, receiver or other authorized party works with SourceX directly. SourceX will want to see that the borrower reached 50+ full-time employees at peak (contractors excluded), operated long enough to build several years of records, can show it holds the rights to license them and has an authorized person to sign. The company fit checker gives a preliminary, non-binding read, and the business introducer's guide to operational data licensing explains the process end to end. Venture lenders working through a startup default should also read the venture debt shutdown guide.

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company. Payment follows the money: the reward is due only after the buyer pays and SourceX receives its fee, no reward is guaranteed, and the company's own proceeds are never reduced by it.

This is general information, not legal, tax or financial advice. Confirm the governing state's version of Article 9 and the chain of title with your own counsel before acting.

Next step

Before the notice goes out, split the collateral into owned IP, licensed-in rights and operational records. If the records look substantial, register as a partner and introduce them while the borrower is still cooperative.