What Happens to Intellectual Property During Liquidation?

When a business goes into liquidation, one key area of focus is the handling of its intellectual property (IP).

This involves identifying and valuing the company’s IP, such as patents and trademarks, and deciding the best way to manage these assets.

What Happens to Intellectual Property During Liquidation?

When a company enters liquidation, its intellectual property (IP) assets, such as patents, trademarks, designs, and copyrights, become part of the company’s estate, which is distributed to creditors.

The insolvency practitioner (IP) responsible for overseeing the liquidation process will evaluate the value of these IP assets and decide whether to sell them, license them, or retain them for the benefit of the company.

Are Intellectual Property Rights Sold During Company Insolvency?

Yes, during company insolvency, intellectual property rights (IPRs) can be sold if they are deemed to have financial value. These assets, including patents, trademarks, and copyrights, are simply a form of asset that can be liquidated to gain the best possible return for creditors.

The sale of IPRs is managed by the insolvency practitioner overseeing the liquidation or administration process. If intellectual property rights have no value or can’t be sold, the insolvency practitioner will look for other ways to repay the company’s debts.

Types of intellectual property with potential value include:

Patents

Patents provide exclusive rights to inventions for a period of 20 years. During liquidation, the IP may be sold to the highest bidder, or it may be licensed to a third party who is interested in exploiting the patent’s potential. The decision of whether to sell or license a patent will depend on factors such as the patent’s scope, the remaining duration of the patent term, and the market demand for the invention.

Trademarks

Trademarks are valuable assets that identify and distinguish a company’s goods or services. During liquidation, the IP may be sold to a third party who wishes to acquire the trademark rights or to a competitor who wants to prevent the trademark from being lost. The decision of whether to sell or retain a trademark will depend on factors such as the strength of the trademark, the likelihood of successful enforcement, and the overall financial situation of the company.

Designs

Designs protect the visual appearance of products. During liquidation, the IP may be sold to a third party who wishes to exploit the design for their own products or to a competitor who wishes to prevent the design from being used by others. The decision of whether to sell or retain a design will depend on factors such as the originality and distinctiveness of the design, the market demand for products with similar designs, and the overall financial situation of the company.

Copyright

Copyright protects original literary, dramatic, musical, and artistic works. During liquidation, the IP may be sold to a third party who wishes to exploit the copyright, such as a publisher or film producer. The decision of whether to sell or retain a copyright will depend on factors such as the value of the copyright-protected works, the potential licensing opportunities, and the overall financial situation of the company.

Need Advice?

If you are considering liquidating and would like more information on valuing your intellectual property, contact Company Debt today. We provide free, confidential advice on company debt and business recovery solutions to help resolve your situation quickly and painlessly. Call 0800 074 6757.

FAQs on Intellectual Property and Liquidation