Sun, Jan. 06, 2008

License in Bankruptcy

CK - Washington.   A bill of December 5, 2007 seeks improved protection for executory license contracts in bankruptcy under German law. The new language in proposed §108a of the federal insolvency statute governs principal and ancillary obligations in license agreements.

The principal norm states that [a] license agreement concluded by the insolvent party with respect to intellectual property continues in force with effect for the bankruptcy estate. The rule for ancillary obligations is less strict; the continued validity of the agreement is contingent on the need of the licensee to retain rights to use the IP. The administrator of the insolvent estate may impose financial adjustments in the event that the contract should display an unusual disparity between license and consideration.

The bill is called Entwurf eines Gesetzes zur Entschuldung mittelloser Personen, zur Stärkung der Gläubigerrechte sowie zur Regelung der Insolvenzfestigkeit von Lizenzen. Among other matters, it also increases the personal liability of officers, directors and shareholders of corporations in Germany in the event of their failing to timely initiate insolvency proceedings.

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