Bankruptcy Disposal Of Pending Intellectual Property Licensing Contracts

As the main subject of the ownership and use right of intellectual property,enterprises' risk of improper management may incur bankruptcy,which will inevitably influence the relevant intellectual properties.The ownership of intellectual property is one of the most important assets of high-technology enterprises and meanwhile the licences to intellectual properties is also crucial to the normal production and function of an enterprise depending on the technology and other forms of intellectual properties.The validity of an intellectual property licence contract will become unstable with one party of the contract on the verge of bankruptcy.Therefore,in the case of an enterprise's bankruptcy,how to deal with the intellectual property licence contract is a problem.However,in Enterprise Bankruptcy Law of the People's Republic of China,it is not stipulated how to solve the intellectual property licence contracts.As for this issue,the solution is usually subject to the Article 18 of the Enterprise Bankruptcy Law,which regulates the disposition of the contracts that has not been fully performed by both parties.But due to some characteristics of intellectual property licence contracts,some identification and adjustments are necessary to treat the intellectual property licence contracts involved in the cases of enterprises' bankruptcies as the executory contracts.On the basis of analysing the disposition of the executory contracts in the case of bankruptcy and considering the characteristics of intellectual property licence contracts,this essay addresses the issue of the disposition of executory intellectual property licence contracts.Specifically,it includes the identification of executory intellectual property licence contracts in the enterprise bankruptcies,the principles which the bankruptcy administrators should observe when exercising their right of option towards executory intellectual property licence contracts and the analysis of the choice of continuing to perform the contracts,transferring or refusing to perform the contracts.In the first chapter,it is analysed how to judge and identify the executory intellectual property licence contracts.As for this issue,there exist two standards: the standard of “material breach” and the standard of “incomplete performance”.The latter one is relatively more suitable for China.On the basis of the standard of “incomplete performance”,the executory intellectual property licence contracts shall be identified from the aspects of the duration and the condition of performance.Then according to the characteristics of intellectual property licence contracts,the executory intellectual property licence contracts shall be identified and defined pursuit to the abovementioned standard.The second chapter of this essay mainly discusses the principles that the bankruptcy administrators should follow when exercising the option right of the executory intellectual property license contracts,including the principle of maximizing bankruptcy property,the principle of indivisibility and the principle of timeliness.Meanwhile,due to a certain degree of conflict between the principle of maximizing bankruptcy property and the legislative intent of the law of intellectual property,the bankruptcy administrator needs to make certain trade-offs and coordination.The third and fourth chapters of this essay are the main chapters,which analyse the bankruptcy administrator's two choice to continue or refuse to perform the executory license contracts.The third chapter mainly discusses the situation where the bankruptcy administrator chooses to continue to perform the executory intellectual property license contract.First,the bankruptcy administrator needs to fulfil some requirements to continue to perform the executory intellectual property license contracts,including the requirements for the consent of the creditors' meeting or the court and the requirement for guaranty for the continuing performance.Then this chapter analyses the effectiveness of the renewed license contract that can survive after these two requirements are met.Next,the issue of the effect of the option to continue to perform the executory intellectual property license contracts is analysed from the general validity of the general executory contracts and the specific contents of the intellectual property license contract.Finally,with the consideration for the characteristics of the intellectual property license contracts,the requirements needing to be met are analysed for the bankruptcy administrator to transfer the executory intellectual property license contracts after choosing to continue to perform them.And the chapter then explores the effect on the three parties of the bankrupt transferor,the non-bankrupt counterparty,and the transferee.The fourth chapter of this essay finally discusses the situation where the bankruptcy administrator chooses to refuse to perform the executory intellectual property license contract.First,it analyses the necessity of granting the licensee a right of re-selection in the case of the licensor's bankruptcy and the bankruptcy administrator's refusal to perform the executory intellectual property license contract,as well as the content of the re-selection right and its restrictions.Next,according to the bankruptcy administrator's choice to refuse to perform the contract to be performed,the executory contracts are cancelled.The effectiveness of the cancellation of an executory contract is mainly includes three aspects.First,the retrospective effect of the termination of the contract should be denied;then the non-bankrupt party's right to claim damages caused by the bankrupt party should be recognised;and finally,the nonbankrupt party's right to claim for liquidated damages based on the terms of the original contracts should not be supported.Through the discussion in the above four chapters,this article systematically analyses the disposition of the executory intellectual property license contracts in the case of the enterprise's bankruptcy.