Courts Precise Nature of Transition of Right to Claim Remuneration from Licensee When Licensor Is Bankrupt

The upper courts upheld the dismissal of the claim for recovery of remuneration under the license

agreement filed by the former licensor declared bankrupt. The basis for the dismissal of the claim was the

conclusion that the right to demand payment of royalties passed to the new acquirer of the exclusive right,

the successful bidder.

The company filed a lawsuit claiming a debt of over 32 million Rubles from the licensee.

As the right holder, the company concluded a license agreement on granting the right to use software and

databases. In accordance with the agreement, the remuneration consisted of a fixed amount and an amount

depending on the market value of the rights to use the intellectual property objects at the time of the decision

to extend the term of the agreement, if any. The second part of the remuneration was to be paid annually

over several years.

However, later the right holder was declared bankrupt with the opening of bankruptcy proceedings and by

the results of a public auction concluded an agreement for the alienation of exclusive rights to the results of

intellectual activity transferred to the defendant under the license agreement.

Having considered that the defendant had not paid the major part of the remuneration, the former right

holder filed a lawsuit. The courts denied the claim in three instances.

The courts found that not only the exclusive rights to the software had passed to the acquirer, but also the

right to demand payment of remuneration from the licensee, including for the year following the conclusion

of the alienation agreement (i.e., the remuneration demanded by the plaintiff).

The courts concluded so by analyzing the regulation on the sale of the bankrupt’s property approved by its

creditors. The regulation stated that the initial price of intangible assets under the licensing agreement was

determined by the appraiser’s report. At the same time, according to the report, the value was determined on

the assumption that the only possible way to receive income was to receive the license fee from the

defendant.

Thus, by auctioning off the exclusive rights in the bankruptcy case and referring in the provision to the

determination of their initial price according to the appraisal report, the plaintiff actually recognized the right

of the acquirer to receive remuneration under the license agreement.

Sergey Zuykov, the Managing Partner of Zuykov & Partners, Russian Patent Attorney and Eurasian Patent

Attorney comments as follows. The plaintiff’s position contradicts the basic concept of estoppel, based on

which a party is deprived of the right to refer to objections to previously performed actions and transactions,

as well as decisions made, if its behavior indicated their validity.

Thus, as the courts reasonably concluded, the plaintiff’s assertion that it has the right to claim remuneration

for the year following the year of alienation of the exclusive right contradicts the earlier actual recognition

of the acquirer’s right for remuneration under the license agreement.