tag:blogger.com,1999:blog-7923005810906159036.post6089999698862328107..comments2024-03-27T12:49:05.975+00:00Comments on IP finance: Question on Rejection of IP Licenses in Bankruptcy or InsolvencyAnne Fairpohttp://www.blogger.com/profile/02579190868405783459noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7923005810906159036.post-28779080839834682412009-04-20T19:08:00.000+01:002009-04-20T19:08:00.000+01:00Renzo,
Thanks--I was referring to the right to di...Renzo,<br /><br />Thanks--I was referring to the right to disclaim onerous property under UK law.<br /><br />Anonymous,<br /><br />Thanks. Indeed I am familiar (I even remember the pre-365(n) days!<br /><br />Rick,<br /><br />Thanks for reminding me of the DAK case.Neil Wilkofnoreply@blogger.comtag:blogger.com,1999:blog-7923005810906159036.post-25936340499033370042009-04-20T18:03:00.000+01:002009-04-20T18:03:00.000+01:00After seeing the other comments, I noticed that mi...After seeing the other comments, I noticed that mine was the only one addressing situations where debtor is the licensee as opposed to the licensor - mea culpa.<br /><br />But this business about forcing the licensor debtor to assume the license is interesting. Let us know when you've finished the article!Rick Allisonnoreply@blogger.comtag:blogger.com,1999:blog-7923005810906159036.post-49285267783092620402009-04-20T17:15:00.000+01:002009-04-20T17:15:00.000+01:00In the bankruptcy of DAK Industries, the debtor re...In the bankruptcy of DAK Industries, the debtor rejected a license from Microsoft for distributing copies of Word. The license had a royalty rate per copy sold and minimum commitment requirements. After filing the bankruptcy petition, the debtor rejected the contract and the court found that the money owed under the minimum commitment requirements became a general/unsecured claim. The court's analysis focused on whether the contract was more like a sale of goods (in which case Microsoft would only have a general claim) or a license for ongoing use of the IP (in which case Microsoft would be given administrative expense priority).<br /><br />While the court focused on the character of the contract between Microsoft and DAK to determine the priority of the obligations, some people (including myself) think that a more reasonable approach would have been to center the analysis on whether or not Microsoft would have been able to enforce the future obligations of the license outside of bankruptcy. Such an approach would create a result in bankruptcy that follows what would have happened outside of bankruptcy. However, in the context of a patent license, this could call for a full-blown patent trial within the bankruptcy court.<br /><br />Microsoft Corp. V. DAK Industries, Inc., 66 F.3d 1091 (9th Cir. Cal. 1995)<br /><br /><br />As I write this, I realize that the case is primarily about the priority given to license obligations in a bankruptcy, but it is a good example of a debtor rejecting an IP license during a bankruptcy.<br /><br />-RickRick Allisonnoreply@blogger.comtag:blogger.com,1999:blog-7923005810906159036.post-26400156896798475802009-04-20T16:55:00.000+01:002009-04-20T16:55:00.000+01:00I assume you're familiar with Bankruptcy Code 365(...I assume you're familiar with Bankruptcy Code 365(n), allowing continued use by licensees of patents and copyrights? Trademark are not included, but I recall a case where a hotel franchisee was allowed to continue its license because of the harm to it if the license was terminated - but I'll be darned if I can find it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7923005810906159036.post-12302000691248329112009-04-20T14:13:00.000+01:002009-04-20T14:13:00.000+01:00I was surprised by the assertion "all systems seem...I was surprised by the assertion "all systems seem to allow the trustee, in some fashion, to reject the license". I didn't think that this was generally the case in the UK. <br /><br />In UK corporate insolvencies, office holders can only disclaim "onerous property" which is defined (Insolvency Act 1986, s 178) as including "unprofitable contracts". The mere grant of a licence does not - to my eyes - constitute such a thing. To be unprofitable the cost of performing the contract needs to be more than the benefit obtained; and there is generally no cost in merely granting rights (albeit ancillary performance obligations might have an associated cost).<br /><br />The language in section 315 IA 1986for individual bankruptcies seems the same. <br /><br />But I know of no cases, so happy to see further comments on this.Renzo Marchinihttps://www.blogger.com/profile/03939442858551002416noreply@blogger.com