Patent Licenses & Bankruptcy
A patent is an intellectual property right granted by the U.S. government in exchange for the public disclosure of the invention. The patent owner has the exclusive right to exclude others from using the patented invention for a limited time. If the licensee of a patent declares bankruptcy, the license can be sold as part of the estate.
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Patent Licenses
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The owner of a patent can give others the right to make or sell the invention. This right is obtained through a patent license. A patent license permits the exclusive or nonexclusive right of the licensee to market or sell the invention.
Executory Contracts
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Most patent license agreements are executory contracts. An executory contract is a contract that still requires material performance from both parties.
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Bankruptcy and Patents
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Under the bankruptcy code, a bankruptcy filer must list all executory contracts still in force. If the license agreement is an executory contract, the license may be eligible for assumption or reassignment. If the filer is the licensee and the agreement is not executory, the patent license becomes a part of the debtor's bankruptcy estate. Under Chapter 7, it may be at risk of being sold by the trustee.
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References
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