Is The License Agreement Really An Executory Contract?
Before a court will permit a bankruptcy trustee to assume, assign or reject an IP agreement, it must first determine that the agreement is executory in nature. If the agreement is not executory, then it is generally not subject to rejection by the bankruptcy trustee. While the title of the agreement is indicative of the parties’ intent, courts examine the practical effect of the agreement to determine if any of the “essential rights” in the underlying intellectual property have transferred an ownership interest, thus rendering the agreement non-executory. In determining if the licensee has acquired a property interest, courts look for the three “bundle of rights”: (1) the right of exclusivity; (2) the right to transfer; and (3) the right to sue infringers. If these three rights have been transferred, then the licensee is imputed to have “title” to the intellectual property and the license agreement is generally outside the scope of a bankruptcy debtor’s rejection. If less than all thre
