IP LAW CLIENT ALERT: Eastern District of Virginia Bankruptcy Court Limits the Use of Foreign Insolvency Law to Cancel the Rights of Licensees of U.S. Patents

    9 November 2011
    Under U.S. law, a bankrupt patent licensor (or its trustee) may assume or reject a patent license agreement. However, if the licensor or trustee rejects a license, Bankruptcy Code § 365(n) provides that a licensee can elect to retain its rights to the licensed patent, including a right to enforce an exclusivity provision. In return, the licensee must continue to make any required royalty payments. Thus, a licensee cannot be stripped of its rights to the licensed intellectual property.  The law of other countries, such as Germany, does not provide the licensee with this protection if the licensor is bankrupt.