July 14, 2022

Taking Security Interests in Human Reproductive Tissue: Clarifying Lender Options under Federal and State Law

Can human reproductive tissue (“HRT”) held by a fertility clinic serve as collateral for a loan to (or investment in) the fertility clinic? In short, the scope and extent of governmental regulation addressing the sale of or transfer of ownership interests in HRT held by a fertility clinic varies from state to state; however, most state laws would likely prohibit the sale of HRT except in very specified cases. As an extension of this concept, most state laws would also prohibit taking a security interest in the HRT, as would ethical and religious-based concerns triggered by the concept of third-party ownership interests in another person’s HRT.

HRT stored by a fertility clinic could include any of the following:

  • Human sperm and egg cells that have been provided to a fertility clinic for storage on behalf of the progenitors of those cells, likely for use with in vitro fertilization at a later date. These sperm and egg cells are provided subject to an agreement between the fertility clinic and the progenitor under which the latter pays a reasonable storage fee to the clinic for its storage services.
  • Human embryos that have been fertilized in vitro and are in cryo-storage awaiting implantation. These embryos are also provided pursuant to an agreement with the fertility clinic, subject to payment for the clinic’s storage services.
  • Finally, donated human sperm and eggs that have been provided to a fertility clinic or tissue bank to help other individuals build and grow a family. Typically, these donations are subject to an informed consent whereby the donor indicates the agreed upon uses of the HRT. For example, the donor could indicate whether or not the sperm or eggs could be used in connection with any kind of clinical research.

Uniform Commercial Code Limitations: Article 9 of the Uniform Commercial Code, which governs secured transactions, makes no definitive statement on the topic as to whether HRT can serve as collateral. Article 9 is broad, and “collateral” is defined as “the property subject to a security interest or agricultural lien. The term includes: (A) proceeds to which a security interest attaches; (B) accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and (C) goods that are the subject of a consignment.”[1] The term “property” is not defined. The term “goods” is defined broadly as “all things that are movable when a security interest attaches. The term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes….” Article 9 seems to be drafted so broadly as to permit the grant of a security interest in HRT as property.

A Hofstra Law Review article examined this issue with respect to all human materials in 1991 under the scope of Article 9, concluding that, “unless forbidden by federal or state law, human materials may be used as collateral.”[2] Thirty years later, we draw the same conclusion with respect to security interests in HRT.

Further under Article 9, it is indeed possible to take a security interest in intellectual property, which would fall under the article’s definition of “general intangibles.” In fact, it is a standard practice of many lenders to encumber the copyrights, trademarks and patents of debtors and record such encumbrance with the U.S. Patent and Trademark Office. This “general intangibles” definition essentially serves a “catch all” category of collateral that covers personal property not more easily categorized elsewhere. By way of example, software is generally considered a “general intangible.” While in theory HRT would similarly be classified in this category, we note that HRT cannot be copyrighted or patented under the basic tenets of intellectual property law. Copyrights are generally (i) original, (ii) works of authorship, and (iii) fixed in a tangible medium; HRT on the other hand is the result of an automatic process in which no human creativity plays a part, and for this reason, one cannot file a copyright in their own HRT. Further, it is well understood that the laws of nature, natural phenomena, and abstract ideas cannot be patented. In short, we are unable to treat HRT as intellectual property, and therefore, unable to attach a security interest under Article 9’s “general intangibles” definition.

Federal Law. The applicable federal law, the National Organ Transplant Act (“NOTA”) of 1984, prohibits any person to “knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the transfer affects interstate commerce. The preceding sentence does not apply with respect to human organ paired donation.”[3] “Human organ” is defined as “the human (including fetal) kidney, liver, heart, lung, pancreas, bone marrow, cornea, eye, bone, and skin or any subpart thereof and any other human organ (or any subpart thereof, including that derived from a fetus) specified by the secretary of Health and Human Services by regulation.”[4] Embryo, ova, and sperm are excluded from the definition of “human organ.” Thus, we look to existing case law and state law for answers.

Case Law. As mentioned previously, an underlying issue in this discussion is the concept of third-party ownership interests in another person’s HRT, and the question of whether various types of biological material can be owned. Because ownership is a precondition for economic transactions, ownership rights are critical to the analysis of whether a security interest can be attached to HRT and has been discussed to some extent in case law. In order to thoroughly analyze the unique issues presented by economic transactions involving biological material and any security interests or remuneration, we first need to clarify to what extent biological material can be owned.

In the well-known case of John Moore v. The Regents of the University of California,[5] the mixing of labor was established as the foundation of a rightful property claim to a cell line. This case has served as the foundation for biotechnological research and development. The facts of the case are as follows: John Moore had a form of leukemia which led to the removal of his spleen. Moore signed the customary consent form but was not informed that his spleen was going to be used for research. His surgeon, along with other colleagues, undertook research on Moore’s T-lymphocytes that lead to the development of a cell line. The Regents of the University of California were granted a patent for the method of producing this cell line as well as the use of this method to produce lymphokines. During the period of the research, additional samples of blood, skin and bone marrow were taken from Moore. The commercialized research findings were worth an estimated $3 billion. Seven years after Moore’s diagnosis was made, he was asked to sign a consent form permitting use of his body products and transferring rights in the products to the Regents of the University of California. He declined and subsequently issued proceedings claiming conversion, breach of fiduciary duty, and failure to obtain consent. He won his conversion claim on appeal with the California Court of Appeal, holding by a majority decision that Moore had property rights in his body parts. Then on appeal to the Supreme Court of California, the majority reversed this decision and determined that Moore did not have the right to sue for conversion. Ultimately finding that an individual does not have a de facto property claim to their own cell line. One of the reasons given by the majority for taking this position was that granting Moore such property interest would hinder biotechnological development.

Cases like Moore have influenced the wider debate about who has ownership rights to organs and biological material. On the other end of the spectrum in the Hayflick[6] case, which was eventually settled out of court, cell lines were classified as property. The facts in that case were fairly similar to the Moore case but the outcome was different. Here, Leonard Hayflick, working at Wistar Institute in Philadelphia, then Stanford University on research funded by the National Institute of Health (“NIH”), used the cells of an aborted fetus to create a commercially profitable cell line. When he tried to sell the cell line, NIH accused him of stealing government property. Overall, the applicable case law precedent is fairly inconsistent,[7] so in order to better understand the legal implication of this question, in addition to reviewing existing case law related to rights to buy or to sell or to store parts of bodies and/or rights over ‘particles’ of bodies, such as DNA codes, genetic material, we must also look to state law classifications of the larger picture item, HRT specifically.

State Classifications. States have classified HRT in various ways – as property, as children, or as something in between. The type of classification is the threshold to the analysis as to whether HRT is a fertility clinic’s asset in which a security interest may be granted. If HRT is property, then perhaps a security interest could be granted to a lender. But, even then, could HRT be sold in the event of a bank loan default by a fertility clinic? We are unaware of any state laws directly on point; however, states have opined on the issue via judicial decisions and state laws that are tangential to the issue.

  • HRT as Property. In Arizona, the Supreme Court upheld an agreement between two parties that provided that their embryos were the “joint property” of the couple, requiring joint consent to any disposition of the embryos and donation in the event an agreement between the parties could not be reached.[8]
  • HRT as Children[9]. In Louisiana, on the other hand, embryos are considered persons (though there is conflict with respect to whether embryos are juridical or natural persons).[10] In Louisiana, an embryo also “exists as a juridical person until such time as the [embryo] is implanted in the womb.”[11]
  • HRT as Something In Between. In Tennessee, embryos are considered something in between. A Tennessee county, appeals, and supreme court grappled with this question in Davis v. Davis.[12] Initially, the county court awarded a woman “custody” of her and her ex-husband’s embryos and directed that she “be permitted the opportunity to bring these children to term through implantation” (emphasis added). The Tennessee Court of Appeals , however, held that the embryos could not be considered “children” and awarded joint custody to the woman and her ex-husband, implying that the embryos were their mutual property.

    The Tennessee Supreme Court ultimately concluded that the answer lies somewhere in between “that entitles them to special respect because of their potential for human life.”[13] The court held that:

    “[D]isputes involving the disposition of embryos produced by in vitro fertilization should be resolved, first, by looking to the preferences of the progenitors. If their wishes cannot be ascertained, or if there is dispute, then their prior agreement concerning disposition should be carried out. If no prior agreement exists, then the relative interests of the parties in using or not using the embryos must be weighed. Ordinarily, the party wishing to avoid procreation should prevail, assuming that the other party has a reasonable possibility of achieving parenthood by means other than use of the embryos in question. If no other reasonable alternatives exist, then the argument in favor of using the embryos to achieve pregnancy should be considered. However, if the party seeking control of the embryos intends merely to donate them to another couple, the objecting party obviously has the greater interest and should prevail.” [14]

More recently, in California, the court in Vergara v. Loeb, involving high-profile celebrities Sofia Vergara and Nick Loeb gave similar weight to the party wishing not to procreate, siding with Sophia Vergara with respect to her desire to prevent Nick Loeb from using the embryos they created via in vitro fertilization and relied on the terms of the contract between the parties.[15]

Even if a bank obtained some kind of ownership interest in HRT in states that rely on contract law to determine dispositions of HRT, like Tennessee and California, the use of such HRT would be limited to the use indicated in the executed consent forms, which in this scenario do not seem very beneficial to a bank to justify taking a security interest.

Conclusion. Non-donated HRT that is stored at a fertility clinic and subject to an agreement between the fertility clinic and the biological progenitor(s) would most certainly not qualify to serve as collateral on a bank loan or investment in a fertility clinic. HRT is typically subject to a paid service agreement that governs its storage and use; and it would also be viewed as the property (or children, or somewhere in between…) of someone else — i.e. the biological progenitor(s). Thus, the fertility clinic lacks the authority to provide a security interest in the HRT.

Donated HRT Considerations. But what about donated HRT that is no longer tied to the specific donor and is not the donor’s property? Can this donated HRT serve as collateral on a loan? This answer turns on (a) the contents of the donor’s consent form and (b) state laws limiting the sale of HRT.

State Statutes. State statutes on the transfer, sale, and disposition of HRT vary. In California, for example, section 367g of chapter 12 of title 9 of the penal code makes clear that it is unlawful to knowingly use sperm, ova, or embryos for any purpose other than that indicated by the provider of the sperm, ova, or embryos on a written consent form. New York has a similar law.[16]

Further, California specifically prohibits the sale of eggs and embryos for medical research or the development of medical therapies.[17] However, while the state also prohibits the sale of “human organs” (which includes human tissue) for purposes of transplantation, sperm is exempt from the prohibition. Technically, it does appear that sperm could potentially be subject to a sale, but only if it is also consistent with the terms of the applicable parties’ HRT disposition consent form. Florida law, however, is much broader and prohibits the sale or transfer of “any human organ or tissue [for] valuable consideration.”[18]

Even when the HRT has been donated and is not considered the property of the biological progenitor(s), fertility clinics may still lack the authority to provide a security interested in donated HRT pursuant to applicable state law restrictions.

Practical Considerations. Even if state law permitted the limited sale of HRT that is donated (i.e. that is not the clear property of someone else), practical considerations would prevail. Assuming momentarily that a fertility clinic were to default on a loan, and the lender sought to sell the collateral to make up the difference — and assuming that the bank could circumvent issues associated with holding appropriate tissue bank licensure to even take possession of the donated HRT — it is entirely unclear where, to whom, and under what circumstances a sale would actually take place. 

[1] U.C.C. § 9-102(12). 
[2] Kevin H. Smith, Security Interests in Human Materials, 28 Hofstra Law Rev. 127 (1991), available,
[3] 42 U.S.C. § 274e(a). “The term ‘human organ paired donation’ means the donation and receipt of human organs under the following circumstances: (A) An individual (referred to in this paragraph as the “first donor”) desires to make a living donation of a human organ specifically to a particular patient (referred to in this paragraph as the “first patient”), but such donor is biologically incompatible as a donor for such patient. (B) A second individual (referred to in this paragraph as the “second donor”) desires to make a living donation of a human organ specifically to a second particular patient (referred to in this paragraph as the “second patient”), but such donor is biologically incompatible as a donor for such patient. (C) Subject to subparagraph (D), the first donor is biologically compatible as a donor of a human organ for the second patient, and the second donor is biologically compatible as a donor of a human organ for the first patient. (D) If there is any additional donor-patient pair as described in subparagraph (A) or (B), each donor in the group of donor-patient pairs is biologically compatible as a donor of a human organ for a patient in such group. (E) All donors and patients in the group of donor-patient pairs (whether 2 pairs or more than 2 pairs) enter into a single agreement to donate and receive such human organs, respectively, according to such biological compatibility in the group. (F) Other than as described in subparagraph (E), no valuable consideration is knowingly acquired, received, or otherwise transferred with respect to the human organs referred to in such subparagraph.” 42 USC § 274e(c)(4).
[4] 42 U.S.C. § 274e(c)(1).
[5] Moore v. Regents of the University of California, 51 Cal 3d 120 (1990).
[6] Constance Holden, Hayflick Case Settled, Science, Vol. 215, Issue 4530 (1982), available:
[7] See additional cases referenced in this article Terrell v. Torres, 248 Ariz. 47, 52 (2020), as amended (Feb. 21, 2020) and Davis v. Davis, 842 S.W.2d 588, 597 (Tenn. 1992).
[8] See Terrell v. Torres, 248 Ariz. 47, 52 (2020), as amended (Feb. 21, 2020).
[9] The criticism associated with the ownership of another person and the comparison to slavery has influenced the wider debate about property rights to the body and body parts. (See John Moore v. The Regents of the University of California). These ethical concerns contribute to the inconsistent principles that govern the concept of third-party ownership interests in another person’s HRT. The “personhood” debate has recently moved to the national forefront following the U.S. Supreme Court’s recent ruling in Dobbs v. Jackson Women’s Health Organization.
[10] See LSA-R.S. 9:123, 9:126; La. C.C. art. 24.
[11] LA-RS 9:123.
[12] See Davis v. Davis, 842 S.W.2d 588, 597 (Tenn. 1992). 
[13] Davis v. Davis, 842 S.W.2d 588, 597 (Tenn. 1992). 
[14] Id. at *604.
[15] See Vergara v. Loeb, No. B286252, 2019 WL 337817, at *6-7 (Cal. Ct. App. Jan. 28, 2019). 
[16] See 10 NYCRR § 52-8.8. 
[17] See Cal. Health & Safety Code § 125350. 
[18] See Fla. Stat. § 873.01.