By Jordan Markham*
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In uncertain times, or when dealing with uncertain partners, planning for the possibility of bankruptcy ex ante can provide a very real benefit to a party contemplating a patent licensing agreement. Since the financial crisis of 2008, many contractual partners who formerly looked rock solid have experienced major cash-flow problems. In addition, it has always been the case that in some fields of technology, such as biotech, a significant number of businesses are expected to fail. Thus, it is important to think through at the outset how a license might be treated by a bankruptcy court, and where possible, to structure the agreement accordingly. How to best do this will depend primarily on whether a party is the patentee or the licensee, and on the extent to which rights are transferred (i.e. whether the transaction results in a sale or merely a license agreement). As we shall see, in the context of a bankruptcy proceeding, the patentee is generally better served by a greater, and a licensee by a lesser, transfer of rights.