A challenging global business environment — reshaped by the disruption of the pandemic, challenges to supply chains, the emergence of new transformative digital technologies, changing workforce trends, and soaring inflation and interest rates in some jurisdictions — is increasing business and legal risk around licensing transactions.
Licensing transactions, usually requiring long-term collaboration, even in normal times require a significant degree of confidence in the viability and stability of the business model of both parties. The instability of the global economy has led to a surge in instability at a macro and micro level, and is exposing weakness in businesses that seemed perfectly stable until recently. This is now frequently affecting licensing relationships which find themselves exposed to the ripple effects of the global transformations or, at worst, to the insolvency or restructuring of a party to a license.
For companies already experiencing distress and undertaking insolvency proceedings, creditors may pursue strategies to recover as much of their debt as possible and to protect valuable assets, such as intellectual property. The licensees of insolvent companies may seek to preserve their rights to use licensed intellectual property and licensors may want to ensure royalty payments are collected and optimized. Lastly, opportunistic third parties may find opportunities to bid on and acquire intellectual property assets that wouldn't ordinarily become available. Sales of intellectual property to third parties may have a considerable effect on both licensors and licensees.
Each of these parties will need to understand the unusual rules of intellectual property licenses in insolvency proceedings in order to effectively approach the risks and opportunities posed by this complex landscape. This complexity is enhanced when the intellectual property licenses at issue in an insolvency case cross borders. In some instances, the debtor in an insolvency case may seek to enforce the laws of its home jurisdiction in a foreign country where the counterparty to the license resides or operates, catching the counterparty off-guard. It is therefore critical that businesses involved in these types of transactions understand the insolvency laws and procedures in all affected jurisdictions.
This guide presents answers to some of the most common IP licensing issues arising in insolvency proceedings in key jurisdictions — including notably the United Kingdom, where recent insolvency legislation has introduced significant reforms to the insolvency process and the treatment of intellectual property in such proceedings.
Flavia Rebello, Gledson Campos and Mariana Conrado, Partners at Trench Rossi Watanabe* (São Paulo), also contributed to this publication.
*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.
