The International Association for the Protection of Intellectual Property, generally known as AIPPI, is the world’s leading international organization dedicated to the development and improvement of the regimes for the protection of intellectual property. Bernt Juthström and Tomi Teinilä of Waselius participated in the work of the Finnish National Group of the AIPPI working committee Q241 regarding IP licensing and insolvency in spring 2014. The National Group prepared a report regarding the current legislation and practice as well as proposals for substantive harmonization and improvements to the current system.
Under Finnish law it is in many respects unclear how IP rights and especially IP licenses are treated in insolvency proceedings. One reason for this is that the laws governing Finnish bankruptcy and administration proceedings do not separate IP rights or IP licenses from other types of contracts, assets or property rights. In addition, license agreements rarely take into account insolvency aspects, except for in the termination clause.
In many circumstances there is a fundamental conflict between the interests of the creditors of the insolvent company and the solvent party to the IP license agreement. For example, the object of a bankruptcy is to sell all assets of the bankrupt company and use the net proceeds to satisfy, to the extent possible, all creditors of the bankrupt company. At the same time the object of the solvent party to the IP license agreement may vary depending on, for example, the nature and terms of the license. For example, in case of insolvency of a licensor, it is usually not in the interest of a licensee to terminate the IP license agreement, but that the license is continued regardless of the insolvency. On the other hand, in case of the insolvency of the licensee, it may be in the interest of the licensor to terminate the license.
In the event of bankruptcy, the decision power as to the assets and liabilities of the bankrupt company will transfer to the bankruptcy estate/the bankruptcy creditors. The bankruptcy estate has, as a rule, the right to decide that it will continue agreements which have not been fulfilled by the insolvent company, but the estate does not have an obligation to continue. However, although the situation is not clear under Finnish law, it is likely that the bankruptcy estate would not have the right to cancel an already fully paid-up license for the life of the underlying IP right.
As regards administration proceedings, the administration of a company will not, in principle, have a direct impact on the continuity of contracts that are subject to administration proceedings. Notwithstanding the above, for example certain lease agreements where the debtor company is the lessee may be terminated by the administrator. If an IP license is interpreted as a lease, it is possible that in situations where the insolvent company is the licensee and the license is not yet fully paid-up, the IP license may be terminated by the administrator by observing a short notice period.
For further information, please contact
Bernt Juthström
Partner