Can I Protect My Intellectual Property in Bankruptcy?

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More often than you may realize, Americans have to face the unfortunate reality that they dug themselves into a deep financial hole that they cannot get out of without outside assistance. Namely, they may have no choice but to declare bankruptcy. If you find this to be your case, then your biggest fear may be losing out on ownership rights over certain assets that you worked so hard to obtain, such as your pieces of intellectual property. Continue reading to learn how to protect your IP rights in bankruptcy and how an experienced Essex County, New Jersey intellectual property lawyer at The Ingber Law Firm can work to ensure this protection.

Can I protect my rights to intellectual property in bankruptcy?

Regardless of whether you are filing for Chapter 7, Chapter 11, or Chapter 13 bankruptcy, your assets, income, and expenses may be examined by your bankruptcy trustee and soon after cataloged in your bankruptcy estate. Specifically, your bankruptcy estate assets may include any assets that you have full or partial legal interests in, such as your intellectual property.

Further, your bankruptcy trustee may classify your intellectual property as either an exempt or non-exempt asset. In Chapter 7 bankruptcy, an exempt piece of IP may mean that your bankruptcy trustee is barred from selling it to pay off your due creditors. In Chapter 11 or Chapter 13 bankruptcy, such an exempt asset may be kept after being incorporated into a reorganization plan or repayment plan, respectively. Evidently, the opposite applies to a non-exempt piece of IP.

Generally speaking, non-value pieces of intellectual property may be considered exempt while high-value pieces may be non-exempt. Ultimately, the bankruptcy trustee may determine its value by reviewing its replacement value, projected royalty value, and liquidation value, among other factors.

Lastly, it is worth mentioning that this procedure may seem relatively straightforward if you have full legal interest in your intellectual property. However, bankruptcy law becomes more complex if your IP is tied to a licensing agreement with a licensee. For this, consulting with an IP lawyer and/or bankruptcy lawyer is strongly encouraged beforehand.

What can I do to ensure the protection of my intellectual property rights?

If you wish to protect your intellectual property rights with a bankruptcy filing, you must understand the importance of timing. For example, the New Jersey bankruptcy court may place an automatic stay as soon as you declare bankruptcy. With an automatic stay, any IP infringement claim placed against you before the date on which you filed may be paused. At the same time, an automatic stay may consider your IP infringement claim against a third party, which you filed before your bankruptcy date, as a bankruptcy asset that may be incorporated into your bankruptcy estate.

Understandably so, you may be overwhelmed with your imminent bankruptcy proceedings and its implications. So please seek the assistance of a skilled Essex County, New Jersey intellectual property lawyer from The Ingber Law Firm. We look forward to having a conversation with you.