In a case of first impression, a U.S. bankruptcy court charged with enforcing the rights of a foreign insolvency administrator against assets in the United States has held that foreign insolvency law may not be invoked to cancel the rights of licensees of U.S. patents.
Licensees of U.S. patents rely on § 365(n) of the U.S. Bankruptcy Code for assurance that licensed rights will continue notwithstanding a bankruptcy of the licensor. Section 365(n) permits a licensee, in exchange for continued payment of royalties, to elect to continue to use licensed intellectual property in the event that the license is rejected in bankruptcy. Conventional wisdom among intellectual property lawyers identifies two important limitations on the protections of § 365(n): (i) the statute does not protect a licensee’s rights to trademarks or to non-U.S. intellectual property, and (ii) the statute, as a provision of the U.S. Bankruptcy Code, is not applicable if a licensor files for bankruptcy outside of the United States.
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