FALL 2010

Trade Secrets

 

Course No. 9200-704 (& 804)-801

ID No. 85737 & 85736

Time:  W 6:30 - 9:30 p.m.
Room:  W-215
Professor Jay Dratler, Jr.
Room Across from 231D (IP Alcove)
Home: 330-835-4537
Copyright © 2000, 2002, 2003, 2006, 2008, 2010   Jay Dratler, Jr.   For permission, see CMI.

Some Provisions of U.S. Bankruptcy Code Affecting IP Licenses


11 U.S.C. 365.   Executory contracts and unexpired leases

(a)  Except as provided in sections 765 and 766(1) of this title and in subsections (b), (c), and (d)(2) of this section, the trustee, subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor.

* * *

(n)
    (1)  If the trustee rejects an executory contract under which the debtor is a licensor of a right to intellectual property, the licensee under such contract may elect—
      (A)  to treat such contract as terminated by such rejection if such rejection by the trustee amounts to such a breach as would entitle the licensee to treat such contract as terminated by virtue of its own terms, applicable nonbankruptcy law, or an agreement made by the licensee with another entity; or

      (B)  to retain its rights (including a right to enforce any exclusivity provision of such contract, but excluding any other right under applicable nonbankruptcy law to specific performance of such contract) under such contract and under any agreement supplementary to such contract, to such intellectual property (including any embodiment of such intellectual property to the extent protected by applicable nonbankruptcy law), as such rights existed immediately before the case commenced, for—

        (i)  the duration of such contract; and

        (ii)  any period for which such contract may be extended by the licensee as of right under applicable nonbankruptcy law.
    (2)  If the licensee elects to retain its rights, as described in paragraph (1)(B) of this subsection, under such contract—
      (A)  the trustee shall allow the licensee to exercise such rights;

      (B)  the licensee shall make all royalty payments due under such contract for the duration of such contract and for any period described in paragraph (1)(B) of this subsection for which the licensee extends such contract; and

      (C)  the licensee shall be deemed to waive—

        (i)  any right of setoff it may have with respect to such contract under this title or applicable nonbankruptcy law; and

        (ii)  any claim allowable under section 503(b)(3) of this title arising from the performance of such contract.
    (3)  If the licensee elects to retain its rights, as described in paragraph (1)(B) of this subsection, then on the written request of the licensee the trustee shall—
      (A)  to the extent provided in such contract, or any agreement supplementary to such contract, provide to the licensee any intellectual property (including such embodiment) held by the trustee; and

      (B)  not interfere with the rights of the licensee as provided in such contract, or any agreement supplementary to such contract, to such intellectual property (including such embodiment) including any right to obtain such intellectual property (or such embodiment) from another entity.
    (4)  Unless and until the trustee rejects such contract, on the written request of the licensee the trustee shall—
      (A)  to the extent provided in such contract or any agreement supplementary to such contract—

        (i)  perform such contract; or

        (ii)  provide to the licensee such intellectual property (including any embodiment of such intellectual property to the extent protected by applicable nonbankruptcy law) held by the trustee; and

      (B)  not interfere with the rights of the licensee as provided in such contract, or any agreement supplementary to such contract, or any agreement supplementary to such contract, to such intellectual property (including such embodiment), including any right to obtain such intellectual property (or such embodiment) from another entity.


11 U.S.C. 101 (Definitions)

(35A) "intellectual property" means—
    (A)  trade secret;
    (B)  invention, process, design, or plant protected under title 35;
    (C)  patent application;
    (D)  plant variety;
    (E)  work of authorship protected under title 17; or
    (F)  mask work protected under chapter 9 of title 17;
to the extent protected by applicable nonbankruptcy law[.]


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Footnotes

1.   [Professor's note]  Sections 765 and 766 relate to commodity contracts and do not appear generally relevant to intellectual property licensing.

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2.   [Professor's note]  Subsections (b) through (d) may be relevant to licensing transactions.  Subsection (b) requires the trustee to cure any default or provide adequate assurances of a prompt cure before assuming the contract.  Subsection (c) precludes the trustee from assuming or assigning, without authorization, an executory contract which applicable nonbankruptcy law makes nonassignable.  Subsection (d) provides time limits for assumption or rejection of executory contracts in various types of bankruptcy proceedings.

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3.   [Professor's note]  Section 503(b) relates to administrative expenses in bankruptcy, which enjoy special priority.
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