You sound quite bright to me. I do not think the answer you got was reasonable and appeared as cherry picking. Every time someone asks about contracts or sales out comes the default NDA is enforce but when Eric shares its not in force. How does not work.
Of course if there is some positive to share he would. Regarding those contracts were they new, or a continuation of a licensed technology agreement that GestureTek might be able to continue as to not harm the licensee if the contracts do involve licensed Technology from GestureTek ?.
This is from 2013 but none the less, it shows at lest back then its complex. This may explain why it took over 2 years to discharge and perhaps an issue the Court might look at with the vesting order
Technology Licenses in the Context of a Licensor's Bankruptcy and Insolvency June 24, 2013
Intellectual property rights are critical to various economic sectors. Many companies depend on licensed technology to operate and survive. The licensor-licensee relationship may deteriorate, especially if the licensor starts showing signs of distress or, even worse, becomes insolvent. Canadian legislation offers some clarity regarding each of the parties' rights and obligations in the event of a licensee's insolvency or bankruptcy. However, there is a significant degree of uncertainty with respect to what may happen to an intellectual property license in the event of a licensor's insolvency.
There are four main avenues for a company facing insolvency: (i) assignment into bankruptcy; (ii) a proposal under the Bankruptcy and Insolvency Act;1 (iii) proceedings under the Companies' Creditors Arrangement Act;2 and (iv) private or court-ordered receivership. This article will focus on proposals under the BIA and proceedings taken under the CCAA which entail reorganization rather than liquidation. The proposal provisions in the BIA and the provisions of the CCAA dealing with the termination or disclaimer of contracts offer insolvent licensees some reprieve.
Insolvency of the Licensor The Canadian Position Historically, due to the previous absence of any statutory authority,3 Canadian jurisprudence generally held that trustees in bankruptcy, receivers, and debtor companies undergoing reorganization had the power to disclaim executory contracts4 that had been entered into prior to the debtor's insolvency.5 The existing Canadian jurisprudence is unclear as to whether a license for intellectual property can be characterized as an executory contract.
Depending on the circumstances, it might be advantageous to an insolvent licensor to disclaim its technology licenses so that it can: (i) terminate its obligations to take certain required steps under the license; (ii) attempt to re-license its technology at a higher rate to either the licensee or a third party; or (iii) sell the intellectual property outright, free and clear of any licenses or encumbrances, for a higher price than if it were encumbered. If the license is disclaimed, the licensee is precluded from continuing to use the licensed intellectual property,6 and merely has an unsecured claim for contractual damages against the insolvent licensor, which claim, if successful, would be paid from the remaining property of the insolvent licensor, if any.7
Canadian courts in various jurisdictions, and in different insolvency contexts, have attempted to resolve this issue, with differing results. In Re Erin Features No. 1 Ltd.,8 the British Columbia Supreme Court held that an agreement made by Erin Features, which was in bankruptcy, granting exclusive marketing rights in Canada to Modern Cinema could not be characterized as an executory contract because the film company had "… alienated its property in the film for the purpose of distribution in Canada"9 through a valid conveyance. The Trustee in bankruptcy was not permitted to disclaim the agreement, as it had no better right to the property than the bankrupt and could not terminate property rights that were passed to a third party prior to the bankruptcy.
Conversely, in T. Eaton Co., Re,10 a proceeding pursuant to the CCAA, the T. Eaton Company repudiated a Card License and Services Agreement as well as a Trademark License Agreement, which collectively allowed National Retail Credit Services Company to act as T. Eaton Company's private label credit card provider. The Ontario Superior Court of Justice held that the exclusive license granted to National Retail Credit Services Company did not have the effect of transferring any proprietary interest to the licensee, and could thus be repudiated pursuant to the Eaton's plan of arrangement.
In addition to the risk of having its license agreement disclaimed under the existing jurisprudence, a licensee dealing with an insolvent licensor also faces the risk that the underlying intellectual property license is sold to a third party. For example, in Royal Bank of Canada v. Body Blue Inc.,11 which involved a receivership, the licensee, Herbal Care, argued that its right to manufacture and sell the licensed technology was not affected by an order vesting all right, title and interest of the licensor's assets, including the technology, to a third party. The Ontario Superior Court of Justice found that the license agreement did not constitute a property claim and concluded that the process by which the assets of the licensor were transferred was conducted in accordance with applicable law and the court orders made in the proceeding. The Court held that the licensee had an exclusive license to use the technology, but that even an established license agreement only creates a contractual agreement between the parties, not a property claim. The third party obtained the technology free and clear of Herbal Care's license and all Herbal Care was left with was an action in contract against the insolvent licensor.
Legislative Amendments In recent years, Parliament has amended both the BIA and the CCAA. These amendments create more certainty in relation to the treatment of licenses of technology in bankruptcy proposals and restructuring under the CCAA. Both the BIA and the CCAA12 enable an insolvent licensor to "disclaim or resiliate" any agreement to which it is a party upon the commencement of proposal proceedings under the BIA or a restructuring under the CCAA, except where the licensee continues to perform its obligations under the applicable agreement, in which case it will have the right to continue using the licensed technology, and to enforce an exclusive use.13
To date, such provisions have not been judicially considered and the ambiguity in the scope of protection afforded by these sections has not been clarified. Neither the BIA nor CCAA define the terms "intellectual property" or "use". Also, it is unclear whether ancillary obligations surrounding the license, such as maintaining trademarks and other intellectual property, enforcement, updates, and technology support can be disclaimed or are included in the term "intellectual property" for the purposes of these provisions. Whether a licensee's right to use the intellectual property includes other distinct rights recognized under applicable intellectual property law, such as the right to make and sell under a licensed patent, also remains unclear.
The aforementioned legislative amendments have partially aligned Canadian bankruptcy and insolvency law with the legal framework adopted in the U.S., as discussed below.
AI
