(Second Edition)

Kenneth L. Port,  Jay Dratler, Jr.,  Faye M. Hammersley, Esq.,  Terence P. McElwee,
Charles R. McManis, and Barbara A. Wrigley

On-Line Problem Supplement
Copyright © 2005   Carolina Academic Press.   For permission, see CMI.

Chapter 13

Problem 14:  Protecting Licensees against Licensors' Bankruptcy

As a start-up company, Assist is not on a very firm financial footing.  Contair will be Assist's licensee for use of Assist's patent in the unique computer processor that operates an automobile.  The President of Contair instructs you to draft a clause in the license to ensure Contair access to the patent in the event Assist files a petition for bankruptcy under Chapter 11 of the Bankruptcy Code.  Specifically, he requests that you treat any up-front royalty payments made by Contair to Assist as a loan. Draft a memorandum to the President including the clause he requested with an explanation regarding why Contair will or will not be protected in the event Assist files a petition for bankruptcy.  Discuss the President's request of treating up-front royalty payments as a loan, whether it is possible and whether there are alternatives.

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