Rice v. Miller

In August 2001, Clean Air Technologies, Inc. (Clean Air) borrowed $30,000 from Corinne Rice (plaintiff). Clean Air executed a security agreement with an after-acquired clause giving Rice a security interest in all of various types of property that included, without any limitation, assets listed on any schedules delivered to Rice periodically. The types of property listed included instruments, documents, and general intangibles, among others, as collateral. The security agreement specified that all definitions of property would be the same as in Article 9 of New York’s Uniform Commercial Code (UCC). One month before the security agreement, New York revised Article 9’s definition of general intangibles. The inclusion of patents in the prior version was clear, whereas the new version listed intellectual property in general. In September 2007, Clean Air defaulted on the loan. A court awarded Rice a judgment of $40,841.10 against Clean Air. Pursuant to the security agreement, Rice sought possession of the property listed as collateral and demanded that Clean Air deliver two patents it had acquired along with related documentation. Clean Air had filed for two patents before executing the security agreement and received the patents sometime after. By December 2007, Clean Air had not delivered the patents as provided in the security agreement in the event of a default. Rice filed a motion in New York Supreme Court seeking an order requiring Clean Air to produce the patents and related paperwork. Clean Air officer David Miller (defendant) argued that (1) Clean Air never intended for its patents to be included as collateral, (2) Rice knew Clean Air had pending patent applications and chose not to include patents specifically, (3) the security agreement is vague in relation to patents and unenforceable, and (4) in order for patents to now be included as collateral, they would have needed to be listed on a schedule delivered to Rice, which never occurred.