Bankruptcy and Intellectual Property

Intellectual property smacks with bankruptcy when a technology licensor has a debtor licensee who wants to assign the licensed rights to a licensor competitor.

The Bankruptcy Code provides a debtor protection from spending to perform contract obligations with agreements are executory contracts. These agreements have material terms not yet performed by each party. For example, one party may not have provided services, and the other party not paid.

The Bankruptcy Code allows the debtor to assume, assign, or reject an executory contract, even when sections in the agreement limit assignment without consent of the non-debtor party in the case of bankruptcy.

When the debtor assumes the contract, it means the debtor will to fix any defaults that occurred before the filing of the bankruptcy petition and after the petition filing. For instance, if the debtor has not provided services, the debtor will provide the services suppose to be provided before bankruptcy, and then continue to provide the services after the bankruptcy filing. The debtor agrees to be bound by the terms of the agreement. The debtor may continue as a party to the assumed agreement or assign the assumed contract to a third party to do the work.

If an executory contract is too hard to continue with, such as providing services when there are no further payments by the other party, the debtor may reject the contract, and not perform. Rejection is a material breach of contract that lets the other party stop performing. For instance, the other party, who is not getting services, does not need to pay. However, the other party may suffer a loss because of the debtor’s nonperformance. The non-debtor party ends up with an unsecured claim against the debtor. Unsecured claims take low priority and usually the non-debtor does not get 100% on the claim. If the non-debtor has to sue to determine the damages, the lawsuit may be stayed because of the bankruptcy.

Bankruptcy courts look to federal common law for intellectual property issues instead of state contract law. If the law excuses the non-debtor from accepting performance from or giving a performance to a party other than the debtor, the Bankruptcy Code does not let the assignment go on without the consent of the non-debtor. This may happen when the debtor services are personal, such as when specifically named persons are to perform for the debtor. A non-debtor party has a better chance of getting out of a contract when there is bankruptcy by making the agreement personal.

Top Tax Lawyer NYC Articles

Browse our collection of expert articles pertaining to new york sales tax, ny state tax refund, 
ny state income tax, and other
tax in new york topics.

Miami Florida Tax Articles

Florida Tax Guide Is Social Security Taxed in Florida Federal Tax Benefits of Retiring in the State

Florida Tax Guide: Is Social Security Taxed in Florida? Federal Tax Benefits of Retiring in the State of Florida 2023

Social Security benefits serve as a vital source of income for many retirees. As individuals near their golden years, understanding the nuances of Social Security taxation becomes crucial. In this

September 11, 2023
Florida Tax Information for Taxpayers and Tax Professionals Do I Need to File State Income Taxes in

Florida Tax Information for Taxpayers and Tax Professionals: Do I Need to File State Income Taxes in Florida? Role of Florida Department of Revenue

Are you a resident of the Sunshine State wondering about your state tax obligations? Understanding whether you need to file state taxes in Florida is essential to ensure compliance with

August 28, 2023
Florida State Tax Rate Is There An Income Tax in Florida Everything You Need To Know About Fl ()

Florida State Tax Rate 2023: Is There An Income Tax in Florida? Everything You Need To Know About Florida Tax. Florida Income Tax Calculator

In a world where state income taxes are the norm, Florida stands out as a haven for residents seeking a reprieve from this financial burden. The Sunshine State has gained

August 18, 2023

Have More Questions?

If you have not found the Tax & Accounting answers you are looking for, feel free to search here and browse our article catalog!