Treatment of Intellectual Property License in Insolvency: Analysing Indian law in comparison with the US and UK

Indian Institute of Management Ahmedabad (IIMA) Working Paper, August 2021

48 Pages Posted: 12 Aug 2021 Last revised: 29 Sep 2021

See all articles by M. P. Ram Mohan

M. P. Ram Mohan

Indian Institute of Management Ahmedabad

Aditya Gupta

Indian Institute of Management Ahmedabad; National University of Study and Research in Law, Ranchi

Date Written: August 11, 2021

Abstract

A bankrupt debtor’s ability to escape unprofitable contracts, enshrined in Section 365 of the American Bankruptcy Code, is considered central to a successful reorganisation within Chapter 11. The ambit of this power and the consequence of its application has been the subject of unceasing legal and business controversy. Intellectual property licenses assumed the forefront of this controversy in 1985 when the Court of Appeals for the Fourth Circuit held that Section 365 includes a unilateral power to rescind an Intellectual Property License. Congress reacted to the Court’s decision by amending Section 365 and legislating specific protections for Intellectual Property Licensees. This paper explores the American jurisprudence on the treatment of intellectual property licenses during bankruptcy and examines them within the insolvency regimes of the United Kingdom and India. The study reveals an important legal deficiency: neither jurisdiction incorporates any explicit protections for Intellectual Property Licenses during bankruptcy. Further, we find no substantive provisions that deal with the treatment of ongoing contracts during Corporate Insolvency Resolution Proceedings in India and Administration in the UK. For India, this raises an important issue relating to the desirability of a resolution professional’s ability to interfere with pre-petition IP licensing agreements. The authors underline the importance of such interference and suggest amendments to the Indian insolvency regime to deal with intellectual property licenses during bankruptcy.

Keywords: Lubrizol, executory contracts, Chapter 11 Bankruptcy, Intellectual Property Licenses, Insolvency and Bankruptcy Code 2016, U K Insolvency Act 1986

JEL Classification: K21, K10, K2, F23

Suggested Citation

M. P., Ram Mohan and Gupta, Aditya, Treatment of Intellectual Property License in Insolvency: Analysing Indian law in comparison with the US and UK (August 11, 2021). Indian Institute of Management Ahmedabad (IIMA) Working Paper, August 2021, Available at SSRN: https://ssrn.com/abstract=3903011 or http://dx.doi.org/10.2139/ssrn.3903011

Ram Mohan M. P. (Contact Author)

Indian Institute of Management Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380015
India

Aditya Gupta

Indian Institute of Management Ahmedabad ( email )

Vastrapur
Ahmedabad, 380015
India

National University of Study and Research in Law, Ranchi ( email )

AT- Nagri, Kanke-Pithoria Road
Kanke
Ranchi, 834006
India

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