Insolvency · 6 min read
What happens to patents in insolvency?
The short answer: Patents form part of the insolvency estate as assets and must be monetized. Because renewal fees and official deadlines keep running, they quickly lose value without active management. The routes to monetization are sale, licensing or enforcement against infringers – which can also be fully success-based, at no cost to the estate.
Patents are part of the estate – with an expiry date
Once insolvency proceedings are opened, patents, trademarks and designs form part of the estate. Unlike machinery or real estate, however, they actively lapse: anyone who fails to pay the renewal fees or misses official deadlines in pending examination proceedings loses the IP right without replacement. Every month without a decision costs value.
The four typical hurdles
- Scope of protection: What the IP rights actually cover is often unclear without a technical analysis.
- Relevance: Realistic buyers and licensees often lie beyond the obvious competitors.
- Enforcement: If a third party is already using the technology, an enforceable claim may exist – an often overlooked asset of the estate.
- Costs and deadlines: Fees keep running, and missed deadlines destroy value.
Three routes to monetization
1. Sale
The fastest route to liquidity: the portfolio is sold to a monetization company or a strategic buyer. If TYR acquires it, the estate receives a one-time payment; future fees and administration pass to the buyer.
2. Licensing
Where there is ongoing demand for use in the market, licenses can generate recurring revenue – of interest when proceedings run longer or a restructuring by way of asset transfer is planned.
3. Enforcement
If a third party infringes the IP right, the estate can claim injunctive relief and damages. With litigation funding, it bears neither costs nor risk; if successful, it shares in the proceeds – by way of example, with around 40 percent.
What the administrator actually needs to do
Very little. The name of the insolvent company is enough for a free initial analysis of the IP portfolio – the IP portfolio can be researched in full. A structured assessment with monetization options is usually available within two weeks. Decisions on transfer and agreement only arise once a route has been chosen.
The legal assessment, for instance of claims against infringers, and representation are provided by specialized law firms and patent attorneys, which TYR coordinates on request.
This article is for general information and is not legal advice.