Bill C-55 & Who can use licensed IP after bankruptcy?
The legal maxim that possession is nine tenths of the law may now apply, somewhat analogously, to situations of licensor bankruptcy.
New legislation which quietly came into force on September 18, 2009, clarifies that so long as the licensee “continues to perform its obligations in relation to the use of the intellectual property”, the licensee’s “right to use” will continue.
Sub-sections 32(1) and (5) of the CCAA (see also ss. 65.11(1) and (5) of the BIA) set out that:
32. (1) Subject to subsection (3), a debtor company may disclaim or resiliate any agreement to which it is a party on the day of the filing of the initial a
pplication in respect of the company by giving 30 days notice to the other parties to the agreement in the prescribed manner.
(5) If the company has, in any agreement, granted the use of any intellectual property to a party to the agreement, the disclaimer or resiliation of the agreement does not affect the party’s right to use the intellectual property so long as that party continues to perform its obligations in relation to the use of the intellectual property.
It will be interesting to see how Courts define the terms “intellectual property”, “right to use”, and “continue to perform … obligations” set out in the provisions.
Historically, licensees faced a risk that a Court might extinguish the license on bankruptcy, thereby leaving the licensee in a difficult situation (in the recent Body Blue case, the post-bankruptcy licensee sued the pre-bankruptcy licensee for infringement, and the Court agreed the old license had been extinguished on bankruptcy).
