Intellectual property and liquidation

Are intellectual property rights sold during company insolvency?

In the process of winding up a company, intellectual property like trademarks, patents, designs, copyrights, databases, and domain names are assessed and sold to generate funds for creditors. Safeguarding intellectual property during insolvency is crucial to maintain its value and enhance returns for creditors.

 

What could happen to intellectual property when a company is in liquidation processes?

When a company goes into liquidation, there’s a misconception that its intellectual property loses its worth and can’t be utilised by the officeholder. Yet, in truth, intellectual property rights can retain considerable value even during such situations.

Trademarks, patents, designs, copyrights, databases, and domain names are vital assets in liquidation, significantly enhancing returns for creditors. Additionally, rights to proprietary software or crucial business processes represent other valuable areas of intellectual property that could be assessed and sold.

 

What happens in liquidation?

Liquidation involves selling a company’s assets and distributing the proceeds to creditors. It’s the responsibility of the officeholder to identify all the business’s assets and get them professionally valued before they are sold.

Recognising tangible assets is quite simple, but dealing with intangible assets like goodwill and intellectual property is more intricate. Intellectual property rights must not only be identified but also shielded from depreciation, often necessitating help from external experts.

 

What sorts of intellectual property assets are typically realised during liquidation?

1.Trademarks

Trademarks could be either registered or unregistered by the company, yet usually, registered trademarks carry higher value. However, this value might diminish if the business’s brand or reputation suffers due to insolvency. Hence, the liquidator might opt to swiftly sell the trademark to avert loss of value in case of a prolonged liquidation process.

 

2.Designs

Design rights can be either registered or unregistered, and once more, the value of this intellectual property is influenced by registration. A registered design right provides the company with complete protection and authority over the design, whereas an unregistered design right solely prevents others from copying it.

 

3.Patents

Patents can stay for up to 20 years, either in the application stage (patent pending) or already granted. Typically, a granted patent retains more value if there’s a substantial duration left, but there’s also the matter of annual patent renewal fees that might be applicable.

A company might possess multiple patents, hence it’s crucial to ascertain the nature, present status, and possible value of each one.

 

4.Copyright

Copyright protection is granted upon the creation of original works, like new software or website content, literary works, photographs, or illustrations. However, unlike trademarks and patents, there’s no official registry that unequivocally establishes ownership.

If copyright ownership can be officially attributed to the business undergoing liquidation, it can indeed possess substantial monetary worth.

 

5.Website and domain name

A company’s website usually serves as a showcase for its brand, and together with the domain name, it can offer considerable value in liquidation. Domain registration and the company’s ownership of this vital digital asset are crucial matters in liquidation, as another business might acquire the domain if the registration lapses.


6.Trade secrets

Trade secrets are crucial intellectual property assets, deriving their value from the exclusive knowledge retained by a company in areas like databases, technical drawings and designs, and source code. 

Preserving the confidential nature of trade secrets during liquidation is vital, usually accomplished through the implementation of stringent Non-Disclosure Agreements (NDAs).

For further details on intellectual property and liquidation, our partner-led team at Vanguard Insolvency is available to assist. As part of Begbies Traynor, the UK’s leading professional services consultancy, we can schedule a free same-day consultation to promptly address your requirements.

Feel free to get in touch with one of our team members. We operate from a wide network of offices across the country, ensuring you’re never too far from professional assistance.

 

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Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.