Covid-19: Who owns IP in bankruptcy?
Unfortunately, in uncertain and challenging times, bankruptcy can become an inevitable issue for companies, and intellectual property rights (IPR) may be affected.
The main rule of bankruptcy is that the bankrupt estate assumes responsibility for all the assets in the company, including all IP. This applies to everything from registered patents and trademarks, to trade secrets, data and licenses.
Nevertheless, it may prove difficult to determine what assets the company owned at the opening of bankruptcy proceedings. For example, if a patent was transferred by agreement from company A to company B before A went bankrupt, but is still registered in the public register as A’s property at the time of bankruptcy: Does the bankrupt estate have to respect the agreement, or can the patent be seized as it is registered on A?
Consequences of Norwegian legislative amendments of 2015
As of July 1, 2015, legislative amendments came into force to allow for individual pledging of patents. As part of this legislation, the new Norwegian Patents Act also refers to the rules of the Act on Deeds Register. As a result, transactions, licenses etc., with some restrictions, must be registered in the relevant register no later than the day before the commencement of bankruptcy proceedings, to be respected by the bankruptcy estate. Thus, with some restrictions, the registered ownership will take precedence over agreements between parties.
Please note that Norwegian legislation regulates the ownership of Norwegian patents. Designations of the same patent in other countries will follow the legislation of the countries in which the patents are registered. Similar rules are planned for trademarks in the upcoming new Norwegian Trademark Act.
Irrespective of this, there is also a risk that questions will be raised against agreements regarding the transfer of IPR before the bankruptcy, if this is not reflected in the public register.
These considerations also apply to transfers internally within a corporation, for example, where patents have been registered with the operating company; but are later transferred to an IPR holding company or elsewhere in the corporation structure. If the operating company files for bankruptcy, the corporation risks losing control of the IPR registered on the operating company.
Provide overview in your own ecosystem
We recommend that companies ensure that agreed ownership always matches registered ownership in all relevant registries.
Also, make sure that licensed patents and trademarks are registered in the register, to ensure that the license rights must be respected should the licensor file for bankruptcy. In addition, it is important to always have an updated and clear record of ownership and underlying agreements for all IPRs such that the actual ownership conditions easily may be documented.
Lastly, but not least, one should note that IPR can be covered by a mortgage, either by pledge on a specific patent, or more commonly as part a pledge on the company’s
operating machinery and plant. Consequently, make sure that any transfers are made in compliance with the agreements with the bank or other mortgagees.
With their technical and legal expertise, Onsagers is ready to assist you with intellectual property and intellectual property rights in bankruptcy. We are ready to set up video meetings and contact you to make an appointment if you contact us via this contact form, or if you directly contact one of our consultants in your industry.
Contact us here.