Viktor Krum, the Seeker for the Bulgarian national Quidditch team, was feeling out of his element and decided upon a new training regime in order to hone his broomstick riding skills.  Planning to start his day with an adrenaline rush, he purchased a Hungarian Horntail (dragon) from Charlie Weasely by taking out a loan from Gringotts Wizarding Bank.  In exchange for the loan, the goblins at Gringotts required Viktor to sign a security agreement granting Gringotts a security interest in “all equipment” owned by Viktor.

Three months later, Viktor defaulted on his loan and Gringotts took possession of the Firebolt broomstick he uses primarily in professional play and the Snitch (flying ball used regularly in the sport) that was used in the 2012 Quidditch World Cup.  While the Firebolt belonged to Viktor for 5 years, Viktor stole the Snitch from a collector—Xenophilius Lovegood—who had bought the Snitch from the Bulgarian national Quidditch team upon the Snitch’s retirement from professional use earlier that month. 

To make matters more complicated, the Bulgarian national Quidditch team recently defaulted on a loan from the International Quidditch Association in which it had granted a security interest in “all of the Debtor's inventory.”  Assume that the Snitch has an operational life of 20,000 hours when activated and was in the use and possession of the Bulgarian national Quidditch team at the time of its agreement with the International Quiddich Association.

What are the respective interests of Gringotts and the International Quidditch Association in the Broomstick and Snitch?

1. Neither has a valid security interest in the Snitch or Broomstick because “all inventory” and “all equipment” are super generic terms.

2. Gringotts has a valid security interest in the Firebolt but not the Snitch (because it is inventory and not equipment). The International Quidditch Association has a valid security interest in the Snitch because it was inventory and that security interest remained with the collateral after the sale of the Snitch by the Bulgarian national Quidditch team.

3. Gringotts has a valid security interest in the Firebolt but not the Snitch (because Viktor did not have the power to transfer rights in the Snitch). The International Quidditch Association has a valid security interest in the Snitch because it was inventory and that security interest remained with the collateral after the sale of the Snitch by the Bulgarian national Quidditch team.

4. Gringotts has a valid security interest in the Firebolt but not the Snitch (because Viktor did not have the power to transfer rights in the Snitch). The International Quidditch Association does not have a valid security interest in the Snitch because it was not inventory covered by its security agreement with the Bulgarian national Quidditch team.