Intellectual Property Rights up for Grabs in Cases of Bankruptcy

Intellectual property has become an increasingly important part of a business’s recognized assets. Never has this been more apparent than in today’s down economy. As the number of companies in economic peril continues to climb, the status of intellectual property (IP) rights and how IP assets impact the marketplace can be called into question. When a business is in jeopardy of declaring bankruptcy, it is important for potentially affected parties to know their IP rights should the struggling entity indeed fail. For example, specific issues pertaining to IP oftentimes remain unresolved as the various parties jockey for control of the IP assets.

“Whether a business files for Chapter 7 or Chapter 11 bankruptcy, the manner in which the courts view their IP assets, their licenses and other existing IP agreements can vary greatly,” says Boyle Fredrickson Vice President Michael J. Gratz.

Under some circumstances it is entirely possible for an IP licensee to retain the IP rights, so long as they continue to pay any royalties to the debtor due under the licensing agreement. In these scenarios the debtor-licensor is required to:

• Provide the licensee with access to the IP in question
• Not interfere with the use of the licensee’s existing IP rights under the license
• Comply with any exclusivity provision in the license agreements

“If a business has valued IP assets or maintains important IP licensing agreements, it is critical to understand the consequences a bankruptcy filing can have on IP rights and obligations,” says Gratz. For more information on the intersection of IP and bankruptcy law, contact Michael J. Gratz or your Boyle Fredrickson attorney.