This series addresses the needs the legal community has for technology licensing knowledge by laying out basic concepts, identifying traps for the unwary and offering drafting and negotiating tips. Click here to read parts one, two and three.
The bankruptcy of a party to a license agreement can have a profound impact on the parties to that agreement. Counsel need to have a basic understanding of how license agreements are treated in bankruptcy, and draft accordingly.
- Drafting Tip for Licensees: Try, at a minimum, to get the right to assign to a successor in a corporate restructuring or reorganization situation and, if possible, the right to assign to a successor pursuant to an acquisition
- Drafting Tip for Licensors: Be careful using a “consent not to be unreasonably withheld” clause. Some courts have held this to change the default common law rule of no assignment by the licensee and, therefore, give the trustee or debtor-in-possession the right to assign. Something like “consent in the sole and absolute discretion of the licensor” would be the ideal.
Protection for licensees when the licensor files