False Categories in Commercial Law: The (Ir)Relevance of (In)Tangibility

Abstract

Almost fifty years ago, Grant Gilmore, the co-reporter for Article 9 of the Uniform Commercial Code, recognized the difficulties that intangible assets pose for commercial law, noting that if you can see it, count, weigh and measure it, it exists; if you can't, it doesn't. The original drafters of Article 9 were concerned primarily about facilitating secured transactions in intangible payment rights. Today, the difficulties that Gilmore identified are multiplied by the proliferation of electronic assets, such as Internet domain names and assets in virtual worlds such as Second Life. Although Article 9 of the UCC was revised fairly recently, one area in which it does not adequately cover electronic assets is in its enforcement provisions. The enforcement provisions in Article 9 are based on a false distinction, a distinction based on the tangibility or intangibility of the asset in question. While courts can modernize commercial law through their decisions, courts faced with emerging electronic assets tend to cling to the same false distinction, viewing tangible property as the property paradigm and viewing many intangible assets as either new forms of intellectual property, or worse, as not property at all. This paper explores the problems caused by commercial law's fealty, in the creditors' remedies area, to the notion of tangibility, and suggests that courts and other lawmaking bodies look to general property principles in fashioning rules to govern electronic assets. The article analyzes recent judicial decisions and legislative enactments dealing with electronic assets and identifies some common mistakes that lawmaking institutions make in dealing with these new types of assets. The article concludes by analyzing some older decisions in which courts were forced to refine the concept of possession to account for new types of assets and suggests that courts dealing with electronic assets look to these, and not necessarily to other cases dealing with intangibles, in fashioning rules to govern electronic assets.

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