New Bankruptcy Law Amendments Will Help IP Licensees

On September 18, 2009, many long-awaited amendments to Canada's Bankruptcy and Insolvency Act (BIA) and Companies' Creditors Arrangement Act (CCAA) came into force. One of these new provisions will help protect intellectual property (IP) licensees in the event of the bankruptcy of their licensors.

Under current Canadian common law, it is generally accepted that a trustee in bankruptcy can disclaim some kinds of contracts entered into by the bankrupt debtor, in order to promote the successful restructuring of the debtor's business. It has been unclear, however, whether or not IP license agreements are among such contracts. The issue has been raised, but never settled, in a number of Canadian cases. A discussion of these cases can be found in Stikeman Elliott's February 2009 Intellectual Property Update.