The recent economic turmoil has brought to the forefront
concerns by licensees as to what happens to their rights to
licensed intellectual property upon the bankruptcy of a licensor.
Unfortunately, under Canadian law, the answer to that question is
not clear.
Background
In Canada, it is generally accepted that a bankruptcy trustee
has the right to disclaim certain types of contracts, in order to
promote a viable restructuring of a bankrupt business. However, it
is not clear whether an IP license agreement can be disclaimed as
an executory contract (which are contracts with ongoing obligations
on both sides) by a bankrupt licensor's trustee in
bankruptcy.
The issue has been highlighted, but not decided, in several
Canadian cases. For example, in the 2001 British Columbia Supreme
Court case In Re Erin Features No. 1 Ltd., the Court noted
that Canada's Bankruptcy and Insolvency Act "is
silent on the point and the matter fraught with difficulty."
As the case was
