As a rule, Belgian insolvency law does not tackle the issue of IP rights or licensing agreements in the event of insolvency proceedings. Their fate will therefore be subject to the general provisions of Belgian insolvency law, which vary depending of the type of insolvency proceedings concerned.
There are two main insolvency proceedings in Belgium, bankruptcy (faillite/failissment) and judicial reorganisation (réorganisation judiciaire/gerechtelijke reorganisatie). Each has different objectives: bankruptcy proceedings aim to liquidate the estate and wind up the company, whereas judicial reorganisation aims to ensure the survival of the company or its activities.
The impact of beginning insolvency proceedings
Bankruptcy
Bankruptcy leads to the divestment of the debtor, and the appointment of an administrator (curateur/curator). The divestment extends in principle to all the debtor's assets, whether tangible or intangible, but has no effect on the ownership of the goods.
Beginning bankruptcy proceedings will therefore have no direct impact on the existence and ownership of IP rights. However, the company in bankruptcy no longer has control of those rights as control is transferred to the administrator whose decisions will be driven by the interest of the general body of creditors (la masse/de boedel).
In this context, the administrator may have to decide not to pursue the application process of a patent or a trade mark or not to pay the fees of a trade mark or a patent falling due during the bankruptcy. This would lead to the loss of the IP right.
Judicial reorganisation
Judicial reorganisation allows the debtor to keep control of its company by protecting the debtor from its creditors during a fixed period of time. The moratorium (sursis/opschorting), allows the latter to restructure and revive its activity.
During the moratorium, as a rule, no means of enforcing pre-existing debts may be pursued or enforced. Under article XX.53 BECL, the debtor is, however, allowed to pay pre-existing debts on a voluntary basis where necessary for the company's survival. This would be the case for trade mark registration fees or patent fees which fell due before the moratorium and would have to be paid to avoid the loss of the related IP right.
A judicial reorganisation will, therefore, not usually impact the existence or ownership of IP rights and the company will remain in control of them.
The transfer of IP rights as a result of insolvency proceedings
Bankruptcy
Bankruptcy involves winding up the company and, the first task of the administrator is to choose between the liquidation of the debtor's assets (selling), or the transfer of (part of) the activities of the company, in which case, the administrator will (provisionally) continue the company's activities.
In both cases, the IP rights will end up being transferred to one or more third parties. The transfer will be subject to all the requirements and formalities imposed by IP law provisions.
Judicial reorganisation
In the context of a judicial reorganisation, part or all activities of the company may be transferred, including the related IP rights. All the registration obligations resulting from IP law provisions will have to be fulfilled.
The impact on ongoing contracts
Bankruptcy
Ongoing contracts will not be automatically terminated in the event of bankruptcy of one of the contracting parties, unless:
- the contract contains a cancellation clause (condition resolutoire/ontbindend voorwaarde) or an express termination clause (clause de resiliation expresse/uitdrukkelijk ontbedindbeidng), or
- the contract is concluded intuitu personae, meaning in consideration of the identity of the contracting party.
But, article XX.139 BCEL gives the administrator the right to terminate a contract where it is in the interests of the estate. If a contract is terminated, the contracting party will be entitled to compensation however the actual payment will be subject to the rules around allocation to creditors. Conversely, if the contract continues, all obligations will have to be performed and the debts incurred will have to be paid in priority.
The principles set out above apply only to the extent that a contract is enforceable against the administrator acting as the representative of the general group of creditors. In this regard, it should be noted that only contracts that are enforceable against third parties will be enforceable against the administrator.
A distinction must be drawn between a licensing agreement relating to registered intellectual property rights, such as trade marks, patents or designs, which must be registered with the competent intellectual property office, and licensing agreements relating to unregistered intellectual property rights, mainly copyright and neighbouring rights, which do not require any formalities to become enforceable against third parties.
Licensing agreements will usually be treated just like any other contract and will be subject to the decisions of the administrator, unless otherwise expressly provided in the contract or where it can be established that the licensing agreement is dependent on the services of a particular individual.
Having said that, specific rules apply to publishing contracts and audiovisual production contracts. These contracts are subject to the principle of continuation of contracts, but Belgian copyright law adds some specifications:
- Article XI.185 BECL sets out the process to be followed for the transfer of audiovisual production contracts due to the producer's insolvency, and
- Article XI.200 BECL grants the author the right to terminate a publishing contract in in the event of the editor's insolvency and determines the consequences of such termination.
Judicial reorganisation
Article XX.56 BCEL lays down the principle of the continuation of ongoing contracts and provides that notwithstanding any contractual provisions, the request for or the opening of judicial reorganisation proceedings do not put an end to ongoing contracts nor to their implementing terms. This principle also extends to personal service contracts, unless trust between the parties has been undermined.
The contracting party may only terminate the contract in relation to a contractual breach which occurred before the opening of the judicial reorganisation if the debtor fails to end that breach within 15 days of having been put on formal notice of it.
The debtor may, where required for a reorganisation plan or the transfer of the activity or part of it, decide not to perform the contract during the moratorium. In this situation, the debtor must notify their decision to the other party and the latter may suspend its performance obligations under the contract.
The above principles apply in the same way to licensing agreements, with the same exceptions as bankruptcy (ie publishing contracts and audiovisual production contracts).
