John J. Fry


In October of 1988, Congress enacted the Intellectual Property Bankruptcy Protection Act. The Act is intended to "promote the development and licensing of intellectual property by providing certainty to licensees in situations where the licensor files bankruptcy and seeks to reject the license as an executory contract by providing the licensee an "assurance of being able to continue to use the licensed intellectual property after rejection, while debtors/licensors will still be able to free themselves of burdensome obligations." The Act adds a new subsection to 11 U.S.C. §365 which allows the licensee of intellectual property under an executory contract to choose between two options in those situations where the contract is rejected as part of the licensor's bankruptcy. In order to gain a more complete understanding of the Intellectual Bankruptcy Protection Act and its impact, it is useful to consider the Act in terms of the background, both legal and commercial, from which it developed. This background includes the underpinnings of bankruptcy law, the economic forces which make intellectual property licensing an attractive method for accomplishing technology transfer, and the case law which generated an interest in statutory reform.