Treatment of IP Licenses in Bankruptcy: Advance Preview of My PLI Seminar Outline
The best thing about tight deadlines is the moment they finally come to an end. My latest race against time was to complete this 50 page outline (including appendices) for a Practicing Law Institute (PLI) presentation, entitled Treatment of IP Licenses in Bankruptcy, that I'm delivering next April 27 in Chicago as part of the Advanced Licensing Agreements 2010 seminar series. Here's my introduction to it:
Recent studies report a veritable explosion of intellectual property assets in the past quarter century, with intangible book value as a percentage of market capitalization for the S&P 500 increasing from 1.6% in 1975 to 15.5% in 2005, intangible book value as a percentage of total book value increasing from 1.9% in 1975 to 43.2% in 2005, and intangible market value as a percentage of total market value increasing from 16.8% in 1975 to 79.7% in 2005. Former Fed Chairman, Alan Greenspan, summed up this trend in a speech in 2004 (when his word was still gospel), saying:
In recent decades, the fraction of total output of [the US] economy that is essentially conceptual rather than physical has been rising. The trend has, of necessity, shifted the emphasis in asset valuation from physical property to intellectual property and to the legal rights inherent in intellectual property.
With intellectual property comprising a sizable chunk of reported intangible value, and with vast segments of the world and US economy teetering on the brink of balance sheet or equitable insolvency, it is imperative that IP lawyers understand how bankruptcy law interfaces with intellectual property law for each of the varied types of IP assets and agreements.
This outline provides an overview of key bankruptcy terms of art, like “intellectual property” and “executory contracts.” It then looks at the rights of the debtor/trustee and nondebtor counterparties to IP licenses; first from the perspective of the debtor/trustee as IP licensee, and second, from the perspective of the debtor/trustee as IP licensor. It concludes with a review of various drafting and other strategic considerations that will assist both in upfront structuring of IP licensing transactions and in addressing the rights of the counterparties as the flames of bankruptcy torch the parties’ original understandings and intentions. Appendices at the back provide a handy “issue spotting checklist” and a select bibliography of some of my favorite scholarly works addressing these issues in greater depth.
Before the internet and explosion of online materials on every subject under the sun, there was PLI--a trusted and much appreciated resource to quickly learn about important topics. It's a real privilege to have the opportunity to participate in PLI's Advanced Licensing series, and thanks especially to my fellow Union College grad, Ira Levy of Goodwin Proctor, co-chair of the seminar series for inviting me to participate in this event.
My next two holiday posts will be completely off topic, but certainly appropriate for this time of year when most people's thoughts are fixated, one way or another, on lights; simple reminders of Divine miracles, both great and small, and of all we have to be thankful for.
[The inset picture, of course, is Salvadore Dali's 1931 masterpiece, only 10 x 13 inches in size, entitled "The Persistence of Memory," which came to mind from my latest race against time. Apparently, Dali--only 27--conceived it while suffering from a headache and a bout of "painter's block" after focusing on some Camembert cheese that he had just eaten. "The gooey softness of the cheese, the intensifying headache and Dalí’s general mindset all fused, and he came up with the concept of 'soft watches, one of them hanging lamentably.'" Go figure!]
© Steve Jakubowski 2009