Software licences and the new US bankruptcy code

Abstract

THE DRAFTER of a software license agreement must look ahead in the transaction and consider where the parties want to be in the event of bankruptcy, and then properly weave those considerations into the fabric of the agreement. In the event of the licensor's bankruptcy, the licensee must act without hesitation and precisely to avail itself fully of the benefits of Sec. 365(n) of the Bankruptcy Code. The bottom line of the licensee's failure to do either of these may result in the loss of its rights to the licensed technology. The licensee must not procrastinate when faced with rejection of an executory contract. Under the new Sec. 365(n) of the Bankruptcy Code, it must proceed promptly to assert its rights under this provision to retain its rights to the software covered under the agreement, or alternatively, pursue its monetary claims provided for in the contract.