By Christopher G. Bradley (University of Kentucky College of Law)
The “Internet of Things” (IoT) refers to the networks formed by interconnected devices that can communicate, and be communicated with, remotely. The IoT has already affected our daily lives, as a crucial part of our smart phones, Fitbits, smart watches, car navigation units, and so on. But even more, it has profoundly affected businesses of every sort. Manufacturing, transportation, and utilities firms alone are estimated to have spent more than $347 billion on IoT technology in 2018. Companies have deployed IoT tools in order to automate operations, streamline supply chains, ease regulatory compliance, and facilitate safer and more reliable production.
The IoT also affects secured creditors’ ability to monitor their collateral. For instance, individual tags can be placed on objects as they are checked in and out of a facility; cameras and temperature sensors can assess warehouse or field conditions to protect against loss or theft; vehicles can be tracked at all times and even remotely disabled upon default.
I argue that just as the rise of the IoT represents a revolution in business practice, it should bring a similar one to UCC Article 9. The article argues that Article 9 should allow–and in fact require–creditors to stake their claims in tangible collateral directly rather than through the now-antiquated means of a filing system routed through the debtor’s name/identity.
The proposed system would require creditors to tag items as collateral, or to use an interactive map administered by the state filing office over the Internet, in order to perfect security interests in tangible collateral. After sketching the proposed system, the article considers some of its major costs and benefits.
The full article is available here.