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The Treatment of Intellectual Property Under Bankruptcy Law

By Peter J. Toren

As the worldwide economy expanded over the past decade, intellectual property (“IP”) assets have increased greatly in value and become an ever increasing share of a company's balance sheet. Now, as the economy contracts and many companies are facing bankruptcy, a key question concerns the status of the IP that may have been assigned, transferred, sold or licensed if one of the parties to the transaction declares bankruptcy. The answer may depend on whether the IP in question can be classified as a patent, copyright or trademark and the outcome of this inquiry may be critically important to any company that is in danger of losing its rights to manufacture a licensed product because the licensor declared bankruptcy, as well as to any licensor who may be faced with a totally new competitive landscape because the debtor-licensee sold its rights to the licensor's primary competitor. Accordingly, it is important for attorneys who specialize in bankruptcy law to be able to spot whether a particular type of intellectual property is a patent, copyright or trademark.

Overview of Federal and State Intellectual Property Rights

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