Patent License Assignments in the First Circuit - Glycogenesys In October 2006, a Bankruptcy Judge for the District of Massachusetts examined a chapter 7 trustee's ability to assume and assign the debtor's interest as a licensee under a patent license. In In re Glycogenesys, Inc., 352 BR 568 at 576-77 (Bankr. D. Mass. 2006), the Court looked to the license terms, in addition to the "federal common law" prohibition on patent license assignability, and determined that the licensor was not excused from accepting performance from the proposed license assignee.

The contract for the license in question stated that the debtor could transfer the license to "a successor in interest of all, or substantially all of its business..." provided the assignee agreed to be bound by the terms and conditions of the license contract. The Court held that the proposed sale (which included other assets in addition to the license) was a sale of substantially all of the business. Thus, taking the contract provisions into account, the licensor was not excused as a matter of law from accepting performance from the proposed assignee and the trustee could assume and assign the license.

Contrary to the decision in Sunterra, which failed to recognize that contractual provisions should effect the 365(c)(1)(A) analysis, the Glycogenesys decision recognized that as a matter of non-bankruptcy law a licensor can be required to accept performance from a third party when the transfer of performance is consistent with the license terms.

Labels: 365, assignment, assumption, patent license, sunterra

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