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Creditors of a broadcast station have long been unable to obtain security interests in the station’s FCC authorizations, commonly the most valuable asset held. Traditional agency and court articulations — for example, that “a broadcast license may not be hypothecated by way of mortgage, lien, pledge, lease, etc.” — were based on a narrow construction of � 301 of the Communications Act of 1934, as amended, which provides for spectrum use by limited federal license rather than ownership. Allowing creditor security interests was seen as interfering with the commission’s regulatory authority and need for prior approval of station transfers, pursuant to the FCC’s statutory mandate to review the qualifications of all permittees and licensees. More recently, however, both the Federal Communication Commission and a growing number of courts have recognized a distinction between public and private rights in broadcast licenses. These authorities now permit a creditor to hold and enforce a security interest in the proceeds of the sale of an FCC broadcast license. Such security interests, which are limited to a licensee’s property rights in relation to third parties, do not interfere with the FCC-licensee relationship or otherwise violate FCC policy, provided that they do not grant the creditor any power or control over the license without prior FCC approval. Although the outright ban on security interests in FCC licenses per se remains, in this author’s view, the “proceeds” exception vitiates its continuation, given that no transfer may occur without prior FCC approval. In the meantime, creditors and their counsel may take some comfort in phrase “to the maximum extent allowed by applicable law” in the model clause below: On the Closing Date, Debtor shall grant Secured Party a security interest in all of the tangible and intangible assets that are owned, used or useful by Debtor, as more fully described in the attached Schedule incorporated herein, including without limit all of Debtor’s FCC authorizations for Station and all proceeds thereof to the maximum extent allowed by applicable law.
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Barry Skidelsky, a former broadcaster, is a New York-based attorney and consultant who provides legal and business services to individuals and companies concerned with traditional and new media. Telephone: (212) 832-4800. This sample clause is intended to serve solely as an exemplar and may need to be modified to conform to the legal requirements of your jurisdiction. It in no way constitutes legal advice.

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