Search Logic & Noise Words: How to Proceed when Making Changes

1. Search Logic & Noise Words:How to Proceed when Making Changes Ben Ark, National Corporate Research, Ltd. Wally Boggus, Capitol Services, Inc. Darrell Pierce, Dykema Gossett PLLC/NPRRA #IACA14

2. Search Logic Policy Issues • Circa 1994, IACA and Filing Project investigated possible search logics • Cost was a huge issue • It would be so much easier if we could only get filers to get the debtor name right! • Strict Search Logic Prevailed • But there “had” to be some “wiggle room”, so “noise words” and “The” to be “disregarded” • But based on old paradigm • Computer does not care about “the” • Typos in noise words and “the” mean they are NOT disregarded #IACA14

3. Special Characters: Ä, ñ, æ, é, Ф, Я, etc. • 2001 MARs: 202 As used herein, the term “legible” is not limited to refer only to written expressions on paper: it requires a machine-readable transmission for electronic transmissions and an otherwise readily decipherable transmission in other cases. • Rule begged the question • 2007 MARs: 101.7 Regardless of the method of delivery, information in UCC records may be communicated to the filing office only in the form of characters that are included in [the American Standard Code for Information Interchange character set, as more particularly described in ISO-14962-1997 and ANSI-X3.4-1986(R1997)]. #IACA14

4. Special Characters: Ä, ñ, æ, é, Ф, Я, etc. • 2007 MARs: If a UCC record is tendered that provides characters not permitted under rule 101.7 on a paper-based form, and the filing office nevertheless accepts the form for filing, the filing office will substitute, for each such character, the character “[*]” in its information management system. • Problem with “no substitution” rule: • Filer cannot “provide” debtor name as it is under 9-503, as filer is forced to use substitute characters • Technically, 9-506 rule does not work either because debtor’s “correct name” cannot be searched #IACA14

5. Search Logic Name Normalization • Case-insensitive (A = a) • Ampersand (&) turned into AND • Punctuation removed • “Accents disregarded” • Accent-insensitive OR accented-chars removed? • Topic of previous IACA work groups • Noise endings disregarded • Longer to shorter (National Bank before Bank) • Repeat until none are removed • Beginning “THE” removed • Spaces removed #IACA14

6. Search Logic – Individual Names • Individual names have additional special rules for handling initials for first and additional (middle) names • First and additional initials equivalent to names starting with those initials • Search = John Aaron Smith • Surname = Smith • First = John or J • Additional = Aaron or A or no name • Results may include • John Aaron Smith • John A Smith • J A Smith • John Smith • J Smith #IACA14

7. Search Logic – Individual Names • Search = J A Smith • Results may include • John Aaron Smith • John A Smith • J A Smith • John Allen Smith • Jonathon Aaron Smith • Josh A Smith • J Smith • John Smith • Josh Smith #IACA14

8. Adding Special Characters • 2013 MARS says to disregard accents • Should you transliterate them into base A-Z characters? É  E, ñ  n, ᴁ  AE • Should you treat them as a wildcard? • This was the subject of previous STS panels • Recommendation was to be consistent and publish how you are handling special characters so your filers and searchers know. #IACA14

9. Example of Normalization Search: The ABC & XYZ Cómpany, Inc. • THE ABC & XYZ CÓMPANY, INC. • Make it all uppercase • THE ABC AND XYZ CÓMPANY, INC. • Replace & with AND • THE ABC AND XYZ CÓMPANY INC • Remove punctuation • THE ABC AND XYZ COMPANY INC • Disregard accents; assuming that we’re transliterating • THE ABC AND XYZ COMPANY • Remove INC noise word ending • THE ABC AND XYZ • Remove COMPANY noise word ending • ABC AND XYZ • Removing leading THE • ABCANDXYZ • Remove any spaces #IACA14

10. A Fun Example Search: The Corporation Company, As Trustee • THE CORPORATION COMPANY, AS TRUSTEE • Make all uppercase • THE CORPORATION COMPANY AS TRUSTEE • Remove punctuation • THE CORPORATION COMPANY • Remove AS TRUSTEE noise word ending • THE CORPORATION • Remove CORPORATION noise word ending • THE • Remove leading THE • Nothing • If you do a partial match search, you may just return EVERYTHING! #IACA14

11. Search Logic Change Management • Without regard to policy questions, any change to database or standard search logic that affects outcomes can create legal problems • Expansion: • E.g., nickname table, adding “noise” words, alternative spelling equivalents • Causes financing statements that were not legally effective to become effective under 9-506: • Effective as of when – change date or initial filing date? • Conundrum: statute says initial filing date but makes sense to treat as debtor add, effective from change date • Don’t know how courts will handle #IACA14

12. Search Logic Change Management • Constriction: • E.g., eliminating table of “noise” word endings • Makes a financing statement that was effective under 9-506 no longer “findable” in a standard search logic search • Conundrum: does this make legally effective filing now ineffective, or does it instead create a hidden lien problem? • Don’t know how courts will handle • Has there been a “taking” without due process? • How can searchers protect themselves – search all name endings? • FOOSL View: Strict search logic is preferred, and stable results are more important than the exact rules applied #IACA14

13. Search Logic Change Management • Programming Solution: • Existing search logic applies to existing debtor names, and new logic applies only to names filed after change is effective • Maintains stability of results for existing financing statements and avoids the “taking” and hidden lien problems • Be wary of unintended changes in results • Possible issue with multiple (e.g., in-house versus on-line) systems • Potential differences based on different software language, differences in database structure, etc.? #IACA14