3 (a). Does a license agreement remain valid during an insolvency proceeding
Yes, an IP license remains valid during an insolvency proceeding.
Where the debtor is the licensee, the licensor is obliged to maintain the license and perform its obligations, unless the license is disclaimed. Absent a disclaimer, the licensor is entitled to payment for the continued use of the licensed property after the event of insolvency and will have a claim for any pre-insolvency arrears. If the license is disclaimed, the licensor will also have a claim to any damages suffered.
Where the debtor is the licensor and either disclaims a license agreement or sells the underlying IP, the non-defaulting licensee(s) will continue to have the right to use the IP during and after the insolvency proceedings. The licensee may have a damage claim, as well.3 (b). Is the trustee or receiver obliged to perform the obligations under a license agreement?
A bankruptcy trustee or receiver has no obligation to carry on the debtor's business. However, as noted above, a debtor is obliged to perform its obligations under an IP license unless it is disclaimed. Even then, it must ensure any licensee is provided access to the IP and must not interfere with its rights under the license, including rights of exclusivity.
3 (c). What can a licensee do, if anything, to protect its right to use the licensed IPR?
Under Canadian insolvency law, a non-defaulting licensee will have the right to use the IP during and after the insolvency proceedings, and will have the right to enforce any exclusivity, so long as it performs its own obligations under the license agreement. Again, whether the licensee can demand additional performance and rights under the license terms (e.g., upgrades, maintenance and the right to sublicense) beyond just the right to use the IP is an unresolved issue.
3 (d). Can a licensor prevent a trustee or receiver from selling or transferring the insolvent licensee's rights under a license agreement?
Generally, no. It is difficult for a licensor to prevent the sale or assignment of an insolvent licensee's rights under a license agreement to a third party. If a licensor wishes to try, it must ensure that the agreement is specific and personal to the licensee, such that a third party could not stand in the place of the original licensee (this is challenging). The licensor can also try to prevent a sale or assignment, on the basis that the buyer/assignee is not capable of future performance. In the event of a sale or transfer, the licensor is entitled to insist that the other party adhere to its obligations, and may be able to terminate the license and/or seek damages absent performance. In addition, the licensor would be entitled to exercise any other termination rights it has under the license (e.g., termination on notice, etc.).