Please number your answers with the same numbers used for the corresponding questions.

Transcription

1 Q241 National Group: Title: Contributors: Italy IP Licensing and Insolvency Marco VENTURELLO, Mariella CARAMELLI, Luca GHEDINA, Lorenzo GYULAI, Alberto LANDI, Paolo MISERERE, Carlo NEGRO, Paola NUNZIATA, Odra PAPALEO, Maria PENE VIDARI Questions I. Current law and practice Groups are invited to answer the following questions under their national laws. If both national and regional laws apply to a set of questions, please answer the questions separately for each set of laws. Please number your answers with the same numbers used for the corresponding questions. 1) Does your country have a registration system for IP licenses? If yes, please describe this system. Italian national law provides a registration (also referred to as recordal ) system for IP licenses. According to Article 138 of Italian Industrial Property Code (IPC, Legislative Decree no. 30 of February 10, 2005), any deed that establishes, modifies or transfers rights concerning industrial property titles must be made public through registration at the Italian Patent and Trademark Office. License agreements fall into this provision. It has to be pointed out that lack of recordal does not affect the existence or validity of the agreement but it renders the agreement ineffective against third parties that in bona fide acquired and preserved rights on the industrial property title (Article IPC): accordingly, unrecorded licenses are not opposable to subsequent licensees or assignees of the trademark. Likewise, in the event of a conflict between multiple licensees of the same industrial property right from the same licensor, who registered the license first (and not who acquired it as the first) shall prevail (Article IPC). However, also an unregistered license can support a registration challenged on the ground of non-use, since Article 24 IPC - providing that in order to avoid revocation for non-use, a trademark must be actually used by the owner or with his consent - does not contain any requirement concerning the recordal of the deed through which the consent is got. In accordance with Italian law, public registration of copyright licenses does exist under Article 104 of Copyright Law (Law no. 633, of April 22, 1941). However, Italian law does not require any formal rules on which the effect of a copyright license relies. In effect, contracts for copyright license may be concluded in any form (oral, written or through acceptance by conduct) and a written contract is only needed in order to prove the existence of the license in case of controversy between the parties (Article 110 of Copyright Law). Its registration in public registers has the mere effect of constituting a presumption of the existence and of the date of acquisition of the license, which might be overcome in Court by an opposing party by production of evidence to the contrary. The registers are established and updated by the SIAE (the Italian collecting society of authors and editors) and by the Direzione generale per le biblioteche, gli istituti culturali e il diritto d autore (a cultural institute, which is tied to the Ministry of cultural heritage and activities). 2) Describe the type or types of bankruptcy and insolvency proceedings that are available in your country.

2 Italian law provides different insolvency proceedings that are applicable to any company or individual enterprise whose business is made up by production or trade of goods and services. Small companies or enterprises, as defined in Article 1 of the Insolvency Act (Royal Decree no. 267 of March 16, 1942), are not subjected to insolvency proceedings. As a general remark, in the framework of the European Union EU Regulation no. 1346/2000 provides rules of jurisdiction for opening insolvency proceedings in the European Union. (i) The main insolvency proceeding is the liquidation procedure called Bankruptcy (Fallimento), whose purpose is to satisfy creditors rights in respect of creditors equal treatment (par condicio creditorum) and to remove the insolvent enterprise from the market. After the declaration of bankruptcy, the Court appoints a deputy judge (Giudice Delegato), who supervises the proceeding, and the receiver Curatore, also referred to as trustee), who will manage the liquidation of the business and distribute the proceeds. When the bankruptcy procedure is established, the debtor is not entitled anymore to manage its assets, which are intended to satisfy the creditors rights existing at the moment of the declaration of bankruptcy: the receiver must dispose of all the enterprise s assets (where possible preserving business unit and goodwill), verify all the creditors claim and distribute the available funds to them. The receiver, in particular cases, can also be authorized by the Court to the temporary continuation of the business. (ii) The Pre-bankruptcy Agreement or Agreement with Creditors (Concordato Preventivo) is a so-called minor insolvency proceeding, which entitles the debtor to avoid a declaration of bankruptcy and all the resulting patrimonial and personal consequences (Articles 160ss Insolvency Act). When the requirements provided by law are met, the insolvent debtor can put forward a composition procedure, paying a percentage of its debts respecting the above-mentioned value of the creditors equal treatment (par condicio creditorum). During this proceeding, the debtor may continue to manage its business under the surveillance of the judicial administration, although transactions of extraordinary nature require the approval of the deputy judge. In fact, this is the only Italian insolvency proceeding allowing cram-down, without the possibility for the public receiver to overrule the board of directors. (iii) The Compulsory Liquidation (Liquidazione Coatta Amministrativa) is an insolvency proceeding that applies exclusively to the cooperative companies and the insurance companies. The effects of this procedure are similar to those of the Bankruptcy as far as the creditors are concerned. (iv) The Extraordinary Liquidation (Amministrazione Straordinaria) is an insolvency proceeding abided by Legislative Decree no. 270 of July 8, 1999, that applies to large companies in crisis. The effects of this procedure are the same of the Bankruptcy as regards the creditors. 3) Does the law that governs bankruptcy and insolvency proceedings in your country address IP rights or IP licenses as distinct from other types of contracts, assets, and property rights? If yes, is the law statutory, regulatory, or based on precedent? Please identify any relevant statutes or regulations. As a general comment, Italian law (Royal Decree no. 267 of March 16, 1942) governing bankruptcy proceeding (Fallimento) does not specifically address IP rights or licenses as distinct from other types of contracts, assets and property rights, apart from general provisions concerning publishing agreements (Article 83) and the transfer of IP assets to third parties (Article 108-ter). IP contracts in force at the date of the bankruptcy declaration fall under the general provision referring to "pending contractual relationships". Under this rule, if a contract is pending between the parties when one of them is declared insolvent (i.e. still to be executed in whole or in part), the performance of the contract is suspended, until the receiver (Curatore) decides either to perform or to terminate the contract (such general rule does not apply only when the contract at stake is specifically addressed by Articles 72-bis to 83-bis, which does not include IP license agreements). Furthermore, being the license agreement a contract characterized by continuous performances, in case the receiver performs the contract, the company shall pay the consideration for the previously fulfilled performances (Article 74). In case of IP license agreement, the application of the abovementioned article entails that the receiver, when the bankrupt is the licensor, shall fully pay the royalties due from the date of the last payment occurred before the declaration of bankruptcy.

3 As the specific rule concerning the publishing agreements, see the answer at point 4.f. When the continuation of business is authorized, the pending contracts remain in force until the receiver decides either to perform or to terminate the contract. In case of bankruptcy, all bankrupt's assets and rights fall in the receiver's (Curatore) availability and disposal and are no longer under the bankrupt's administration (so-called dispossession, Article 42). The receiver shall preserve the value of those assets until the liquidation of the bankrupt's assets. Under the majority of Italian legal literature, IP rights must be treated in accordance with the abovementioned general rule, as they are not considered as personal assets (Article 46, it shall be noticed that intellectual works per se are considered as personal assets, and they remain at the bankrupt's disposal, while all the incomes deriving from the exploitation such works fall within the bankruptcy assets). However, Italian Insolvency Act specifically provides that rights on intellectual works, inventions, trade names and databases, shall be sold in accordance with the relevant laws (e.g. Law no. 633 of April 22, 1941 concerning copyright, Legislative Decree no. 30 of February 10, 2005 i.e. the IPC and Legislative Decree no. 196 of June 30, 2003 concerning the protection of personal data). The abovementioned rules apply also in case of Compulsory Liquidation (Liquidazione Coatta Amministrativa). The Extraordinary Liquidation (Amministrazione Straordinaria) is subject to different rules concerning pending contracts, since they remain in force until the special administrator decides either to perform or to terminate the contract. As the Pre-bankruptcy Agreement or Agreement with Creditors (Concordato Preventivo) is concerned, Italian Bankruptcy Law does not specifically address IP issues, thus implying the application of the general rules related to the effects of the composition on pending contracts and on the administration of the debtor's assets. 4) Please answer the following sub-questions based upon the law and jurisprudence in your country that governs bankruptcy and insolvency proceedings: a) Describe the law and its effects on a bankruptcy administrator s ability to adopt, assign, modify, or terminate an IP license. Bankruptcy Since there is no specific reference in the law governing bankruptcy and insolvency proceedings to IP issues, the general rules provided for any type of contract shall be applied to understand the receiver's powers on IP licenses. Pursuant to the general rule in bankruptcy proceedings on pending contract described above, the receiver has the power to terminate the existing IP licenses. The receiver may also grant an IP license as he/she is empowered to manage and dispose of the bankrupt's assets, by virtue of the abovementioned "dispossession". The receiver may also assign an IP license with the consent of the other party. In case the receiver, if he does not terminate the contract according to Article 72 of the Insolvency Act, transfers all the assets of the insolvent enterprise, according to Article 2558 Italian Civil Code the agreements related to the going concern, existing at the time of the transfer, are automatically assigned to the acquiring party, provided that they are not of a personal nature (IP licenses are, according to the majority of opinions, considered not to be of personal nature). However, the other contracting party (the purchaser) is entitled to terminate any such agreements with the company for due cause, within three months from the transfer of the going concern; due cause might be related to financial condition of the going concern s purchaser. As for the power to modify a license agreement, there are no specific provisions in this sense. Pre-bankruptcy Agreement or Agreement with Creditors (Concordato Preventivo) Under the composition with creditors (Concordato Preventivo) there is no "dispossession of the bankrupt which maintains a limited availability of its assets. Therefore, the Court or, as the case may be, the deputy judge, shall only authorize the company to terminate any pending agreement and to compensate the creditors for the occurred damages (Article 169-bis of Insolvency Act). As for the power to grant or modify an IP license, it remains upon the insolvent party, under the supervision of the judicial commissioner (Commissario Giudiziale) or under the written authorization of the deputy judge, in case of extraordinary administration. The insolvent party may also assign an IP license, with the consent of the other party.

4 b) Are equitable or public policy considerations relevant to how an IP license is treated? As in all the civil law systems, the basis for Italian law are codified rules developed in accordance with public policy considerations. A concept of equity as it exists in a common law system, does not exist in Italian law. Accordingly, the treatment of IP license agreements within bankruptcy or insolvency proceedings is determined by public policy considerations underlying the applicable statutory rules and, in particular, according to the overriding objective of safeguarding the interests of creditors in obtaining in as far as possible satisfaction of the amounts owed to them. c) Is the law different for different types of bankruptcy and insolvency proceedings in your country? Since the provisions provided for by the Italian Insolvency Act on pending contracts do not specifically address IP contracts, the answer to the question is to be found in the possibility to extend the application of the general provisions, as described above, in the different insolvency proceedings. The procedure described above in respect of the standard bankruptcy proceeding shall also apply when the company is subject to the Compulsory Liquidation (Liquidazione Coatta Amministrativa). In particular, the law provides for the application of the general provisions prescribed for bankruptcy, being the liquidator (Liquidatore) in the same position of the receiver (Curatore). As for the Extraordinary Liquidation (Amministrazione Straordinaria), introduced by the Legislative Decree no. 270 of July 8, 1999, the law provides for a specific rule for pending contracts (Article 50). Pursuant to such rule, the performance of contracts entered into by the Company by the date of the opening of the procedure is not suspended. However, the special administrator appointed by the Ministry (Commissario Straordinario) may terminate the existing contracts, even those which provide for continuous performance. The Pre-bankruptcy Agreement or Agreement with Creditors (Concordato Preventivo) does not entail that the involved company loses the administration of its assets, although it is subject to the control of a judicial commissioner (Commissario Giudiziale) and of the deputy judge (Giudice Delegato). As a consequence of this, the performance of the contracts pending at the time of the composition with creditors is not automatically suspended. However, the company may ask the Court or the deputy judge for the authorization to suspend or terminate the contracts. d) Does the law require, or give preference to, IP licenses that have been registered according to a registration scheme? In general terms, a license should be provided, prior to the adjudication of bankruptcy, with a fixed date through either notarial deed, certification by public Notary or other public official, or fiscal registration, in order for the license to be effective towards third parties (Article 45 of the Insolvency Act). In any event, the above formalities are prerequisites for recordal of the license with the relevant offices (the Italian Patents and Trademarks Office in case of patents, trademarks or designs; the competent Italian Ministry or the SIAE in case of copyright). This being said, there is no substantial preference accorded to IP registered licenses, as a mere effect of their recordal, within bankruptcy and insolvency proceedings. e) Would the existence of a pledge of or security interest in the IP rights for the benefit of the licensee affect application of the law in the case of an insolvent licensor? Under Italian law there is no specific regulation regarding the effects of bankruptcy and insolvency on a license of an IP right provided with a pledge. According to general rules on securities, the owner of a pledge on a licensed IP right will have a right of preference on the proceeds of the insolvency. In any event, the license will not be directly affected by the insolvency (see below, answer at point 4.f). f) Is the law limited to or applied differently among certain types of IP rights (e.g., patents versus trademarks or copyrights)? If yes, please explain.

5 The only difference in treatment is provided with respect to publishing agreements in the adjudication of the bankruptcy of a publisher. Generally, if a party to an agreement yet to be performed enters into bankruptcy or insolvency, article 72 of the Insolvency Act (Royal Decree no. 267 of March 16, 1942) provides the automatic suspension of the agreement until the receiver declares its intention to take over or to terminate the contract. A deadline for this decision by the receiver is not provided under the law, but a term up to 60 days can be set by the deputy judge of the bankruptcy proceedings following a formal request filed by the other contractual party. Articles 83 of the Insolvency Act and 135 of the Copyright Law (Law no. 633 of April 22, 1941) depart from this general provision in the event of bankruptcy of a publisher during the performance of a publishing agreement. In particular, a publishing agreement can be terminated only if the receiver elects to not continue the publishing business or does not assign it to another editor within the deadline of one year from the adjudication of bankruptcy (however, assignment is not allowed in case of a prejudice to the reputation of the author or to the circulation of the work). The aim of this rule is to balance the interest of the author in continuing the publication of its work, with the interest of the creditors of the insolvent publisher in avoiding a loss of possible income deriving from the publication rights. g) Does the law apply differently to sub-licenses versus main licenses? Italian law does not provide for a specific set of rules applying to licenses within bankruptcy and insolvency, with the notable exception of the effects of insolvency on publishing agreements, as seen above the answer at point 4.f). As a consequence, the regulation of sub-licenses versus main licenses in case of bankruptcy and insolvency is left to the parties agreements within the limits provided by the bankruptcy law, which is mandatory (statutory). h) Does the law apply differently to sole or exclusive licenses versus nonexclusive licenses? No specific provisions apply within bankruptcy and insolvency with respect to sole or exclusive licenses versus non-exclusive licenses, as described above. i) Does the law apply differently if the bankrupt party is the licensee versus the licensor? No. Italian bankruptcy and insolvency law does not distinguish between the contractual position of the bankrupt party. The only exception is provided by Articles 83 of the Insolvency Act and 135 of the Copyright Law regarding the position of the publisher in a publishing agreement (see previous answer at point 4.f). j) Please explain any other pertinent aspects of this law that have not been addressed in the sub-questions above. No further comments. 5) Would a choice of law provision in an IP license agreement be considered during a bankruptcy or insolvency proceeding in your country? Is this affected by the nationalities of the parties to the IP license or by the physical location of the assets involved? In order to answer to the question above, it is first necessary to assess the rules applicable to outstanding contracts (including IP license agreements), when one of the parties is involved in a bankruptcy or insolvency proceeding. Reference must be made to Article 72, paragraph 1 and 2, of the Italian Insolvency Act, already mentioned in the present document. According to said legal provisions, it is clear indeed that it is up to the receiver to decide whether to succeed in and therefore continue the outstanding contract or to terminate it; it is also clear, however, that if the receiver decides to succeed in the contract, he shall undertake all the related obligations, without the possibility of amending the clauses provided for by the contract.

6 This implies that, if the contract contains a choice of law provision, the receiver would be bound by it. Of course the above remarks concern the law applicable to the contract, namely to the obligations undertaken by the parties. On the contrary, the procedural rules applicable to the bankruptcy are determined depending on the physical location of the insolvent undertaking s centre of main interests (usually the registered office): indeed, this is the criterion to determine the applicable insolvency law, as provided for by the EU Regulation no. 1346/2000 on Insolvency Proceedings.. 6) Would a clause providing the solvent party in an IP license agreement the right to terminate or alter an IP license be considered enforceable during a bankruptcy or insolvency proceeding in your country? Would the answer be different if the clause provides for automatic termination as opposed to an optional right to terminate? Pursuant to Article 72, paragraph 6, of Italian Insolvency Act, clauses providing for the termination of the contract upon bankruptcy of one of the parties are null and void. Indeed, such clauses would allow to evade the legal provisions examined in the previous paragraph, which are mandatory and under which it is up to the receiver and the receiver only to take decisions concerning outstanding contracts. In light of Article 72, paragraph 6, both clauses providing the solvent party in an IP license agreement the right to terminate or alter an IP license, and clauses providing for automatic termination shall be considered not enforceable during a bankruptcy or insolvency proceeding. The same rules apply to the composition with creditors with continuation of the business according to Article 186-bis, paragraph 3. 7) Would a clause in an IP license agreement that restricts or prohibits transfer or assignment of the IP license be considered enforceable during a bankruptcy or insolvency proceeding in your country? In order to answer this question, first of all, it has to be pointed out as follows. Pursuant to Article 72 (Insolvency Act), a general rule is applicable to all contracts which are not expressly regulated by Articles 72 bis 83 bis, thus including IP license agreements. In this context, in case of bankruptcy, the contract is suspended until the receiver, with the consent of the creditors committee, declare to succeed in the contract or to terminate it. The contracting party in bonis can issue a notice of default against the receiver and make the deputy judge fix term limits not exceeding 60 days: during this period, the receiver can express his choice (succeed in the contract or terminate it). After this period, in case of no answer by the receiver, the IP license agreement terminates. All this being said, in case the receiver succeeds in the IP license agreement, the clause that restricts or prohibits transfer or assignment of the IP license is enforceable, with the exception of the case of transfer of all the assets of the insolvent enterprise, see the answer at point 4.a). 8) In the event of a transfer or assignment of an IP license resulting from a bankruptcy or insolvency proceeding, what are the rights and obligations between the transferee and the remaining, original party or parties to the IP license? Does it matter if the insolvent party is a licensor, a licensee, or a sub-licensee? The rights and obligations between the transferee and the original party or parties are the ones specified in the IP license agreement. It does not matter if the insolvent party is a licensor, a licensee or a sub-licensee, bearing in mind the answer to point 7 above. 9) In the event an IP license is terminated during a bankruptcy or insolvency proceeding in your country, would the licensee be able to continue using the underlying IP rights (and if so, are there any limitations on such use)? Does the (former) licensee have a claim to obtaining a new license? In the event an IP license is terminated during a bankruptcy or insolvency proceeding in Italy, the licensee is not able to continue using the underlying IP rights. Unauthorized use of IP rights by the

7 former licensee would be considered as IP rights infringement. The Italian law does not contain any provision granting to the former licensee a claim to obtain a new license. In case, the former licensee will be able to negotiate a new license agreement during the bankruptcy or insolvency proceeding but he will not have any claim to obtain it or to obtain particular license conditions. 10) If IP rights that are jointly owned by two (or more) parties have been licensed to a licensee by one or both of the joint owners, and one of the joint owners becomes insolvent, how would the IP license be treated in a bankruptcy or insolvency proceeding in your country? Could the IP license be terminated even if this would result in termination of an agreement between the solvent, joint rights owner and the solvent licensee? The treatment of a co-ownership case with reference to bankruptcy or insolvency proceedings is not expressly governed by Italian law, with the sole exception of the joint estates of spouses (Article 191 Italian Civil Code, that provides the termination of the co-ownership in case one of the spouses is declared bankrupt). With reference to other kinds of co-ownership, legal commentary tends to consider continuation of co-ownership incompatible with the purpose of bankruptcy proceedings to immediately monetize (in as far as possible) the bankrupt s share in the co-owned asset. The objective indivisibility of a jointly owned asset, as in the case of an IP right, does not necessarily prevent the termination of the co-ownership. Indeed, the share of the bankrupt in the IP right can be sold by the receiver to third parties, or to one of the other co-owners against payment of a sum of money, equivalent to the value of the relevant portion. In particular, it should be noted that Article 107 of the Insolvency Act states that the receiver should sell the bankrupt assets through competitive proceedings. Once co-ownership is terminated and/or acquired by new subjects, a new license might need to be granted by the new owner/s.unfortunately, granting a license on a jointly owned IP right is not expressly regulated under Italian law and different opinions exist in legal writing and case law as to the majorities required, in default of prior agreement between the joint owners: whether the agreement of all joint owners (in case of an exclusive license or a non exclusive license for a duration of more than 9 years) or of the 2/3 (in case of a sole license) or their majority (in case of a non exclusive license for a duration of less than 9 years) is required. As a consequence, in the case of two joint owners, the solvent joint owner could not decide alone about the continuation or termination of the license, unless the relevant share complies with the required majorities. 11) Are there non-statutory based steps that licensors and licensees should consider in your country to protect themselves in insolvency scenarios, e.g., the creation of a dedicated IP holding company, creation of a pledge or security interest in the licensed IP for the benefit of the licensee, registration of the license, and/or inclusion of certain transfer or license clauses? As far as this question is concerned, it is necessary to distinguish the insolvency proceeding affecting the licensor from the one which may affect the licensee. As stated above, in case of licensor s insolvency the registration does not prevent the receiver s right to terminate the IP license according to Article 72 Insolvency Act. The creation of a dedicated IP holding company can be useful to reduce the risks of an insolvency declaration of the licensor. However, even an holding company can be insolvent when it has granted guarantees towards banks for the benefit of the subsidiary companies or when, according to Articles 2497ss. Italian Civil Code, it has been held responsible for damages towards shareholders and the creditors of the subsidiary companies, in case of abuse of the direction and coordination activity. For this reason, it would be better if the licensor might be a company aiming only to the exploitation of the IP rights, not granting guarantees in the benefit of the subsidiary companies and not exercising any activity of direction and coordination on other companies. The creation of a pledge does not seem to be really useful to protect the licensee from the insolvency of the licensor and, last but not least, from the likely termination of the IP license. In fact, according to Italian law, the creation of a pledge entitles the creditor to be paid with preference in respect to the other creditors on the sum obtained from the sale of the IP right, but it does not entitle the licensee to purchase the IP right.

8 We should also consider that the pledge is effective only if the licensee has a credit towards the licensor. In the relationship between licensor and licensee, it is quite difficult to suppose a credit of the licensee towards the licensor. Indeed the licensor s bankruptcy is not deemed as a breach of the IP license and no right for damage might arise from the simple establishment of the bankruptcy proceeding. Therefore, to make the pledge effective, it is necessary to provide in the IP license certain provisions, which allow the licensee to be a creditor of the licensor. For instance, if the licensee has made long term investments, the IP license might provide a licensor s obligation to indemnify the licensee in case of termination of the IP license, before a certain period of time from the execution. As stated above, the clauses that grant the licensor the right to terminate the IP license in case of licensee s bankruptcy are without any effect according to Article 72 of the Insolvency Act. As already written, the receiver, if he does not terminate the contract according to Article 72 of the Insolvency Act, can transfer all the assets of the insolvent enterprise, according to Article 2558 Italian Civil Code the agreements related to the going concern existing at the time of the transfer are automatically assigned to the acquiring party, provided that they are not of a personal nature. However, the other contracting party is entitled to terminate any such agreements with the company for due cause within three months from the transfer of the going concern; due cause might be related to financial condition of the going concern s purchaser. In order to prevent automatic assignment of the IP license, the parties might specifically provide the personal nature of the agreement, pointing out the relevant reason of that qualification, and that the licensee shall not assign or transfer the IP license. II. Policy considerations and proposals for improvements to your current system 12) If your country has a registration system for IP licenses, is it considered useful? Is it considered burdensome? Are there aspects of the system that could be improved? Our registration system for IP license is useful but could be further improved. For example, if you search through the Internet website of the Italian Patents and Trademarks Office (UIBM, Ufficio Italiano Brevetti e Marchi) you cannot ascertain whether for a patent or a trademark a license has been registered. 13) If the law that governs bankruptcy and insolvency proceedings in your country does not address IP rights or IP licenses as distinct from other types of contracts, assets, and property rights, should it do so? If yes, should the law be statutory? In the Italian Insolvency Act there are specific rules for example for the procurement contract, the leasing contract and the contract for the rental of a flat. Since in the last decades the importance of intangible assets is significantly increased in comparison with tangible assets, specific rules for IP licenses should be advisable. Furthermore, there should be different rules in case of insolvency/bankruptcy of the licensor, on one side, and of the licensee, on the other side. 14) With regard to a bankruptcy administrator s ability to adopt, assign, modify, or terminate an IP license under the current law of your country, are there aspects of this law that could or should be improved to limit this ability? Should equitable or public policy considerations be taken into account? As a general remark, taking into account the interests of the IP owners a limitation of the ability of the receiver should be introduced. According to the Italian legal system, since the insolvency/bankruptcy is also a matter of public policy (protection of the creditors) and therefore the rules of the Insolvency Act are all mandatory, there are also strong interests and arguments in favor of the receiver s ability to adopt, assign, modify or terminate an IP license. 15) Are there other changes to the law in your country that you believe would be advisable to protect IP licenses in bankruptcy? If yes, please explain. No further comments.

9 III. Proposals for substantive harmonisation The Groups are invited to put forward proposals for the adoption of harmonised laws in relation to treatment of IP licenses in bankruptcy and insolvency proceedings. More specifically, the Groups are invited to answer the following questions without regard to their existing national laws. 16) Is harmonization of laws relating to treatment of IP licensing in bankruptcy and insolvency proceedings desirable? Since most IP licences are transnational, IP and contract law harmonization is desirable. 17) Please provide a standard that you consider to be best in each of the following areas: a) What restrictions, if any, should be placed on a bankruptcy administrator s ability to adopt, assign, modify, or terminate an IP license in the event of bankruptcy of a party to that license? Should these restrictions be statutory? The receiver should in any case maintain the power to challenge possible misbehaviours of the bankrupt. Also under this point of view, the restrictions should be statutory. b) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon pre-bankruptcy registration of the IP license? Pre-bankruptcy registration of the IP license should have an influence on the restrictions, in the sense that restrictions should depend upon it. c) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the bankrupt party is the licensor or a licensee? In the case of a rental of a flat, Italian Insolvency Act foresees different rules in case the bankrupt is the landlord of the tenant. Since also in case of licensor and licensee the interests in place are very different, different rules should be foreseen. d) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the licensee has a security interest in the underlying IP rights? In case of security interest (i.e. pledge) in the underlying IP rights, specific provisions concerning the ability of the receiver to assign the IP rights should be foreseen, balancing such ability of the receiver with the rights of the security interest s holder. e) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the license is a sub-license or a main license? Should the main licensee become insolvent, the sub-licensee should automatically succeed in the licensing contract with the licensor. As far as the financial conditions are concerned, there should be a fair renegotiation rule. f) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the license is sole, exclusive or nonexclusive? Restrictions should be proportionate to the fact that the license is exclusive, sole or nonexclusive in the sense that, for example, if the license is exclusive and the bankrupt party is the licensor restrictions should be higher. In other words, due to the investments done, the exclusive licensee should be more protected.

10 g) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon the type or types of IP rights that are licensed in the IP license? Even if trademarks, patents and copyrights are all included under the notion of intellectual property, they have different economic and legal rationale. Therefore, the restriction should be different. h) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon equitable or public policy considerations? As already mentioned, there is an intimate clash of interests between the IP rights holders on one side and the interests of the creditors of the bankrupt party on the other side. i) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon the language of the license itself, e.g., a right to terminate upon insolvency or a prohibition against assignment? A right to terminate clause is not enforceable, on the contrary a right of prohibition against assignment (Article 1406 and ss. Italian Civil Code) is enforceable against the receiver. j) In the event a bankruptcy or insolvency proceeding in your country involves treatment of an IP license between a domestic entity and a foreign entity, which national bankruptcy laws should be applied? Should this depend on the choice of law clause in the IP license? Should this depend on the physical location of the entities or the assets involved? The current rule provided for by the EU regulation no. 1346/2000 which states that the effects on the IP licenses are regulated by the national law applicable to the insolvency proceeding (i.e. the law of the State where the insolvent undertaking s center of main interests is located) is appropriate. However, the starting of a bankruptcy or insolvency proceeding shall not affect the law chosen by the parties to regulate the mutual obligations arising from the IP license agreements: indeed, a different solution would cause uncertainty in the juridical relationship as to the law applicable to the contract, not allowing the parties to establish ex ante how the IP license agreement will be regulated in the future. 18) To the extent not already stated above, please propose any other standards that you believe would be appropriate for harmonization of laws relating to treatment of IP licenses in bankruptcy and insolvency proceedings. No further comment. The Groups are invited to comment on any additional issues concerning any aspect of IP law and insolvency that they deem relevant. SUMMARY The question, in part a continuation of Q190, faces in detail the consequences of insolvency and bankruptcy proceedings in case of an ongoing license of IP rights, both on the side of the licensor and of the licensee. The given answers outline the fundamental clash of interests between - on one side the receiver (or trustee) to satisfy the interests of the bankrupt s creditors and - on the other side - the IP holders and licensees to respectively protect their IP rights and their investments in the IP licensing scheme. Italian bankruptcy law is statutory and therefore little room is left to drafting clauses, with the aim of protecting the IP holders or licensees in case of insolvency proceedings.

11 The report also outlines the fact that the receiver is in a quite different position if the license is exclusive, sole or non-exclusive; a substantially different position relates also to the fact that the insolvent party is the licensor or the licensee. Last but not least, the cross-border nature of most licenses entails that harmonization of laws at international level is advisable.