Whether a debtor’s property is original collateral or proceeds of original collateral is an important distinction for purposes of lien perfection. However, the ramifications of this distinction go well beyond proper methods of perfection. The U.S. Bankruptcy Code1 treats original collateral and proceeds quite differently, and even a properly perfected security interest cannot survive bankruptcy if it has attached merely to proceeds and not to original collateral.
An area in which this distinction is not only extremely relevant, but has taken on significant complexity, is liens on government licenses, specifically, liens on licenses issued by the Federal Communications Commission. Courts generally have found government licenses, such as FCC licenses, to constitute “general intangibles” under the Uniform Commercial Code (UCC).2 At least in the case of FCC licenses, however, liens on such general intangibles are prohibited by the FCC.3 That prohibition is given effect under the UCC, which excludes from the scope of Article 9 any security interest preempted by a U.S. statute, regulation or treaty.4 Consequently, an FCC license itself may not be subject to a lien under Article 9 of the UCC.
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