Among the most valuable business assets in the economy today are intellectual property assets. They exist in various forms and are protected by various intellectual property regimes, patent, copyright, trade secret and trademark being the most significant. They are commercialized — that is, converted into revenues — predominantly by means of licensing.
If one of the parties to an intellectual property license agreement experiences financial difficulty and seeks the protection of the bankruptcy laws, the rights of the other party to that license will change. The nature of that change, and the extent to which the non-bankrupt party is able to retain the benefit of the rights for which it negotiated in the license agreement, are determined by an interplay among bankruptcy law, intellectual property law and other laws, and will depend on various factors, including whether the debtor is the licensor or the licensee, the type of intellectual property involved, and the nature of the license.
This article sets forth, from the perspective of a business and licensing attorney who does not practice in the bankruptcy area, the governing law and its application and provides practice and drafting recommendations to assist the licensor and the licensee to achieve their original objectives if the other party becomes financially distressed and, ultimately, files for bankruptcy protection.
I. Scope Note
II. The Bankruptcy Setting
A. Overriding Policy Objectives
B. General Structure
C. The Bankruptcy Estate
D. The Automatic Stay
E. Ipso Facto Clauses
F. Debtor's Right to Use, Sell or Lease Property of the Estate
G. Exclusive Licenses
III. Executory Contracts In General
A. In General
B. Assumption
C. Rejection
D. Assignment
E. Definition of Executory Contracts
F. Intellectual Property Licenses as Executory Contracts
G. The 1988 Act
IV. Licenser as Debtor
A. Section 365(n)
B. Trademarks
V. Licensee as Debtor
A. Generally
B. Rejection
C. Non-Assignable Contracts
D. Trademarks
VI. Security Interests In Intellectual Property
VII. Non-Bankruptcy Insolvency of License Parties
VIII. Practice Tips
A. General
B. Pre-License Steps
C. Drafting Options
D. Post-Signing and Pre-Petition
E. Post-Petition
For more information licensing intellectual property issues, please contact Peter N. Barnes-Brown.
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