Tuesday 19 May 2009

Introducing the Tuesday Articles on IP and Insolvency

The aim of the Tuesday Articles on IP and Insolvency is to bridge the gap between what is generally regarded as two separate legal disciplines. Legal practitioners tend to specialise in one area only, whether it be Intellectual Property or Insolvency Law and each of these areas is covered by its own distinct legal literature. The division of specialisations tends to mean that difficulties can arise at the stage when the two areas meet. This series of articles plans to concentrate on corporate insolvency and its impact on IP rights and owners users of those rights. The Tuesday Articles on IP and Insolvency will take a primarily UK standpoint; although reference to other jurisdictions will be made.


The statutory insolvency regime in the UK was largely consolidated in the Insolvency Act 1986. There are also a number of accompanying statutory instruments, in particular: the Insolvency Rules 1986 as amended; the Law of Property Act 1925 (which includes various provisions relating to receiverships); and the Companies Act 1985 (which has particular importance with regard to the registration (s.395) and priority (s.196) of charges).

The regime provides for a number of outcomes for a company that is facing financial difficulty, these include; liquidation (termination of a company); enforcement of security by a creditor; an attempt to rescue the company by way of administrators and voluntary arrangements; and equitable division of a company’s assets.

The outcome that best suits the company may then shape the possible ways that IP assets are disposed of. When a company is facing insolvency there are a number of parties who may be involved in the process, each of whom will have a different objectives and aims. These include, but are not limited to: the company; the insolvency practitioner; creditors; licensees; and other third parties, including those who may have an interest in buying IP assets at reduced prices.


There are a number of IP rights to which parties should pay attention when a company is facing liquidation. These include registered rights (such as patents and trade marks); pending registrations; unregistered rights (such as copyright, unregistered design rights and employee know-how); and goodwill.
Over the coming weeks I will attempt to analyse the effect of insolvency on a company which is IP asset rich. The ‘hot-topic’ in terms of disposing of IP assets seems to be their valuation and the difficulties associated with getting it right. However, I will seek to address a number of other issues including protection of IP assets, whether from the viewpoint of a liquidator, who may want to disclaim onerous property, or from the standpoint of a licensee whose licence has been breached, with no more of a remedy than an unsecured creditor. I will analyse what can be done to protect IP assets, from negotiating a contract at the outset of a relationship, to registration of securities and charges over IP assets and assignment and transfer of rights. I will also consider how the role of shared ownership of IP rights, co-operation agreements and separate companies (such as Joint Ventures), can further assist in the protection of rights in the liquidation process.

Third parties should also be aware of the pitfalls of purchasing IP assets from liquidators. There are very few protective measure in place to ensure that IP rights are disposed of correctly and, as liquidators often do not provide warranties regarding assets sold, due diligence becomes an important step in the process for any buyer.
Throughout the series I will provide regular updates and items of interest from the world of IP and Insolvency and if you, the reader, come across any interesting tit-bits, or have any questions, you can contact me by email at louise.ocallaghan@hardwicke.co.uk.

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