Michigan Companies Need To Make Sure Patents Are Protected

A ruling issued by a U.S. Court of Appeals is extremely important to Michigan companies that own intellectual property because the ruling is intended to help protect their patents and prevent future business disputes. The opinion issued by the court came as a result of a bankrupt foreign company that wanted to terminate certain licenses associated with U.S. patents.

When the German chipmaker Qimonda AG began bankruptcy proceedings in 2009, the German bankruptcy administrator interpreted German law to allow termination of various licenses utilizing U.S. patents. Major U.S. corporations, including Intel and IBM, objected and contended that Section 365(n) of the U.S. Bankruptcy Code entitled them to protection, giving a licensee the right to continue to use a license even if a bankruptcy court allows it to be terminated.

After the bankruptcy court sided with the licensees, the German bankruptcy administrator appealed the decision to the Fourth Circuit court of appeals, which sided with the initial ruling. Although Section 1521 of the Bankruptcy Code would allow a foreign representative to gain additional powers, Section 1522 provides for the protection of the creditors' interests. Unlike a Chapter 11 filing, which is a complete reorganization, the Chapter 15 filing provides a foreign company with protection from U.S. creditors and allows the U.S. courts to assist the foreign courts in its proceedings.

This case points out how complex and intertwined U.S. and foreign business laws can become, making it vital that Michigan companies have the correct company structure in place along with air-tight agreements that allow them to continue using licenses associated with patents. Legal counsel exists to help businesses maintain control of their assets or comply with the law if disputes arise.

Source: Bloomberg, "U.S. Patents Protected in Foreign Cases: Bankruptcy", Bill Rochelle, December 30, 2013

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