Update: Changes to Canada’s Bankruptcy Laws

As we posted in IT Outsourcing during the “Climb Out” and IP Licenses and Bankruptcy, Canada’s bankruptcy laws have historically permitted certain contracts – including intellectual property licenses – to be “disclaimed” in the course of the bankruptcy of the licensor.

Under amendments to the CCAA and to the Bankruptcy and Insolvency Act  brought into force last week, licensees may now take advantage of US-style protections which permit continued use of licensed intellectual property, even in the face of a disclaimer by a bankrupt licensor.  The disclaimer will not affect the licensee’s right to enforce an exclusive right to use the IP, provided the licensee continues to perform its obligations (including continued payment of license fees) under the terms of the license.

Licensors are encouraged to have their standard-form licenses reviewed in light of these amendments.  Licensees should seek advice in the event of the bankruptcy of their licensor.

Calgary – 07:50 MST

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