On November 1, 2019, amendments to the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA) and the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 (CCAA) came into force. Among other changes described in our previous publication, these amendments expand the protection offered to intellectual property (IP) licensees in the event that the licensor enters insolvency.
Previously, both the BIA and the CCAA provided certain protection to an IP licensee from the disclaimer or resiliation of the license agreement. Sections 65.11(7) of the BIA and S. 32(6) of the CCAA allow the continued use of the IP as permitted under the license, so long as the licensee fulfils its obligations in relation to the IP use under the agreement.
This protection was expanded by amendments to the BIA and CCAA that received royal assent on Dec. 13, 2018 as part of the Budget Implementation Act, 2018, No. 2, S.C. 2018, c. 27 (the Act). Sections 266-269 of the Act offer the same protection currently afforded to IP licensees in the event the license is disclaimed to situations where the IP is sold by the licensor, or where a trustee or receiver disclaims the license or sells the IP. The proclamation of these amendments was deferred, but by Order in Council, P.C. 2019-1226, sections 266-269 of the Act came into force on Nov. 1, 2019.
Changes to the BIA:
- Section 266 of the Act introduces the new subsection 65.13(9), allowing an IP licensee to continue to use the IP if it is sold in a restructuring;
- Section 267 of the Act introduces the new section 72.1, allowing an IP licensee to continue to use the IP if it is sold or the license is disclaimed by the trustee in a liquidation;
- Section 268 of the Act introduces the new section 246.1, allowing an IP licensee to continue to use the IP if it is sold or the license is disclaimed by the receiver in a receivership.
Change to the CCAA
Section 269 of the Act introduces the new subsection 36(8), allowing an IP licensee to continue to use the IP if it is sold in a CCAA restructuring.