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IP and bankruptcyA few months back this Seattle bankruptcy lawyer wrote about what happens to intellectual property when a debtor files for bankruptcy. Intellectual property can consist of patents, trademarks, copyrights, and trade secrets. Often musicians for example have intellectual property in the form of copyrights and trademarks related to their music and brand. This property becomes property of the bankruptcy estate once a debtor files for bankruptcy. If there are not enough bankruptcy exemptions to protect the intellectual property, then a bankruptcy trustee has the right to sell or profit from the intellectual property in order to obtain funds in which to pay off the debtors creditors. Generally a bankruptcy trustee does not like to extend out the bankruptcy process and may seek to sell the IP rights to an interested buyer. If the debtor can come up with funds to repurchase the IP rights, then they may keep the IP and the funds spent on obtaining the IP will go to creditors. A bankruptcy case can be left open for a year or two while the trustee figures out whether he can find a buyer for any possible IP rights, but in general a bankruptcy trustee must liquidate assets in a timely manner or a debtor can force the trustee’s hand and file a motion to compel abandonment in which a debtor can argue their case to a bankruptcy judge and the judge will decide whether enough time has passed and whether a trustee must abandon an asset.  Even though a bankruptcy case can be left open, a debtor will still get their discharge if everything goes according to plan, after 90 days from the filing date.

In a recent case, musician/rapper Young Buck filed for bankruptcy in Tennessee and his IP rights became property of the bankruptcy estate. The trustee in his case plans to sell his assets in order to pay off creditors.

If you have intellectual property and are concerned it will not be protected in a bankruptcy filing, you should contact a qualified bankruptcy expert at Symmes Law Group today by calling 206-682-7975

  • Richard Symmes

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