The Effect of Rejection of a Copyright License on a Non-Debtor Licensee

(Excerpt) In general, a trustee may assume, reject, or assign an executory contract of the debtor under title 11 of the United States Code (the “Bankruptcy Code”). Courts have generally held that intellectual property license agreements are executory contracts. If the license is an exclusive copyright license, it is a transfer of ownership under title 17 of the United States Code (the “Copyright Act”). Thus, some courts treat a copyright license as transfer of ownership, not an executory contract. This article explores the rights and obligations of a non-debtor licensee when a debtor-licensor rejects a copyright license under the Bankruptcy Code. Part I analyzes the legal standard and differing approaches that courts have adopted to determine whether a copyright license is an executory contract. Part II examines the effect of section 365(n) on a licensee’s rights and obligations after a copyright license is rejected