INTELLECTUAL PROPERTY SECURITY AGREEMENT

Exhibit 10.3

INTELLECTUAL PROPERTY SECURITY AGREEMENT

This Intellectual Property Security Agreement is entered into as of April 3, 2009 by and between Anacomp, Inc. (“Lender”) and Overland Storage, Inc., a California corporation (“Grantor”).

RECITALS

A. Grantor and Lender are parties to that certain Authorized Service Provider Agreement between Grantor and Lender dated as of July 1, 2001, as amended (the “Service Agreement”).

B. To satisfy payment obligations under the Service Agreement that were due prior to the date of this Agreement, Grantor has issued to Lender a Promissory Note (the “Note”) in the principal amount of Two Million Three Hundred Eighty-Six Thousand Dollars ($2,386,000), with such Note being secured by that certain Security Agreement between the parties dated as of the same date as the Note (the “Security Agreement”).

C. Pursuant to the terms of the Security Agreement, Grantor has granted to Lender a security interest in all of Grantor’s right, title and interest, whether presently existing or hereafter acquired, in, to and under all of the Collateral as defined in the Security Agreement. Any capitalized terms not defined herein shall have the meanings defined in the Security Agreement.

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound, as collateral security for the prompt and complete payment when due of its obligations under the Loan Documents, Grantor hereby represents, warrants, covenants and agrees as follows:

AGREEMENT

To secure its Obligations, Grantor grants and pledges to Lender a security interest in all of Grantor’s right, title and interest, whether now owned or hereafter acquired, in, to and under its intellectual property, copyrights, patents, patent applications, trademarks, know-how, trade secrets, and related goodwill (including without limitation those Copyrights, Patents and Trademarks listed on Exhibits A, B and C hereto), and including without limitation all proceeds thereof (such as, by way of example but not by way of limitation, license royalties and proceeds of infringement suits), the right to sue for past, present and future infringements, all rights corresponding thereto throughout the world and all re-issues, divisions continuations, renewals, extensions and continuations-in-part thereof (collectively, the “Intellectual Property”). Notwithstanding the foregoing, the Snap Intellectual Property is excluded from the Collateral.

This security interest is granted in conjunction with the security interest granted to Lender under the Security Agreement. The rights and remedies of Lender with respect to the security interest granted hereby are in addition to those set forth in the Security Agreement and the other Loan Documents, and those which are now or hereafter available to Lender as a matter of law or equity. Each right, power and remedy of Lender provided for herein or in the Security Agreement or any of the Loan Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power or remedy provided for herein and the exercise by Lender of any one or more of the rights, powers or remedies provided for in this Intellectual Property Security Agreement, the Security Agreement or any of the other Loan Documents, or now or hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by any person, including Lender, of any or all other rights, powers or remedies.

Grantor confirms that Lender is entitled to, and hereby authorizes Lender and any representative of Lender as Lender may select in its sole discretion, as Grantor’s true and lawful attorney-in fact to:

a. Endorse Grantor’s name on all applications, documents, papers, and instruments necessary or desirable for Lender to give effect to the provisions of this Agreement and the intent of the parties hereto;

b. Take any other actions with respect to the Intellectual Property, consistent with this Agreement, as Lender deems in the best interest of Lender solely in order to effectuate the provisions of Agreement;

c. Following the occurrence of an Event of Default under, and subject to the terms and conditions of, the Security Agreement, require and direct that all income, royalties, license fees, damages and other payments payable by any third party with respect to the Intellectual Property be paid directly to Lender; or

d. Following the occurrence of an Event of Default under, and subject to the terms and conditions of, the Security Agreement, subject to the terms of any existing license agreement, assign, pledge, convey, license or otherwise transfer title in or dispose of any or all of the Intellectual Property to anyone.

This power of attorney shall be irrevocable until the Obligations are paid in full. Grantor shall execute, acknowledge and deliver all such instruments and take all such actions as Lender may from time to time reasonably request in order further and fully to effectuate the purposes of this Agreement in each and every country of the world and to carry out the terms hereof. Nothing in this Agreement shall impose on Lender an affirmative obligation or duty to take any specific action, or impose any liability on Lender for the failure to take any action, with respect to any of the Intellectual Property.

Grantor represents and warrants that Exhibits A, B, and C attached hereto set forth any and all intellectual property rights which Grantor has registered or for which Grantor has filed an application with either the United States Patent and Trademark Office or the United States Copyright Office, as applicable.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute the same instrument. This Agreement shall be governed by the laws of the State of California.

IN WITNESS WHEREOF, the parties have caused this Intellectual Property Security Agreement to be duly executed by its officers thereunto duly authorized as of the first date written above.