Introduction

When a business ceases operations, the fate of its intellectual property rights becomes a critical issue. Patents, trademarks, software, copyrights, and domain names do not disappear with the dissolution of the legal entity. These intangible assets retain independent value and may be sold voluntarily, transferred through judicial proceedings, or revert to their original holders where allowed by law.

Managing such rights raises substantial legal, economic, and operational issues. The presence of an insolvency practitioner or liquidator adds complexity to the transfer, valuation, or exploitation of these assets. This is further compounded by ongoing contractual commitments such as licenses, exploitation agreements, and secured creditor interests.

Inadequate preparation can result in significant value losses, including abandoned rights, expired titles, improperly designated assets, and post-transfer litigation. Understanding the applicable legal framework is therefore crucial to secure, enhance, and where appropriate, challenge transactions involving the intellectual assets of distressed companies.

Ownership of intellectual property rights upon business closure

1.1 Classification of intellectual property rights as transferable assets

Intellectual property rights are legally recognized as intangible movable assets. As such, they form part of the company’s transferable assets. Whether recorded on the balance sheet or not, they may be assigned to third parties, licensed, contributed as capital, or used as collateral. This classification confers independent patrimonial value that may be leveraged for accounting, tax, or strategic purposes. In a restructuring or acquisition context, IP rights can be vital to preserving competitiveness or continuity of business.

1.2 Methods of transfer or abandonment

Prior to insolvency, companies may organize the transfer of their IP rights through private or notarized agreements, provided these transfers are registered with the competent office (INPI, EUIPO, or EPO). Registration is essential for third-party enforceability and must be promptly completed. During liquidation, only the liquidator, under court supervision, is authorized to transfer IP rights. If fees are unpaid or actions are not taken, rights may lapse or revert to authors under certain statutory conditions.

The role of the insolvency practitioner in the management of rights

2.1 In reorganization: continuation or termination of contracts

In judicial reorganization, the insolvency practitioner may choose to continue or terminate contracts linked to IP rights, including licenses or distribution agreements. This decision is based on preserving asset value, avoiding liabilities, and facilitating a sustainable business recovery. Active, revenue-generating contracts are often maintained, while unprofitable ones may be terminated through judicial authorization.

2.2 In liquidation : identification, valuation, and sale

Following a liquidation order, the liquidator must inventory all intangible assets, appraise them, and organize their sale. The objective is twofold: satisfy creditor claims and avoid a total loss of value. Assets may be sold individually, such as a patent or domain name, or as part of a global business transfer. The success of these transactions depends on accurate identification, realistic valuation, and formal enforceability through registration with the appropriate authority.

 

 

 

Challenging transfers made during insolvency proceedings

3.1 Grounds for nullity or lack of enforceability

An unregistered transfer of IP rights is unenforceable against third parties. This omission may have severe consequences in disputes. Additionally, a vaguely worded contract may be invalidated due to lack of informed consent or undetermined scope. Courts consistently require clear identification of rights for a transfer to be valid.

3.2 Case law on unlisted intellectual property rights

Courts have repeatedly invalidated the transfer of IP rights not explicitly listed in deeds or court orders. For example, a patent or domain name was excluded from a transfer due to the lack of individual mention, despite being linked to the transferred business activity. Therefore, all rights intended for transfer must be listed clearly, including registration numbers and legal status. Failure to do so can result in legal disputes for the acquirer.

Creditors’ rights over intellectual property assets

4.1 Use of pledges and security interests

IP rights can be pledged to secure creditor claims. When such pledges are registered prior to the insolvency, the secured creditor has priority over sale proceeds. These guarantees must be duly recorded in the relevant national registries (patents, trademarks, designs). Unsecured creditors, however, have no specific priority and must rely on general ranking rules for asset distribution.

4.2 Special legal status of authors

Under article L.132-15 of the French Intellectual Property Code, authors may recover their rights if the contracting company fails. This mechanism protects their moral and economic rights, enabling them to re-exploit or relicense their work. In sectors like audiovisual, publishing, or music, specific rights may also grant authors a pre-emption or priority purchase option to avoid transfers without their consent.

Ensuring continuity of intellectual property use during proceedings

5.1 Maintenance of titles and payment of royalties

To maintain rights, renewal fees, office communications, and regulatory formalities must be managed. The insolvency practitioner may choose to keep certain titles if they have market potential, especially those tied to active operations or acquisition plans. Coordination with foreign agents may also be necessary for international portfolios.

5.2 Preservation of Technical Assets and Commercial Value

The value of intellectual property rights also depends on their exploitability. Without the source code, visual identity guidelines, databases, or associated know-how, a right may lose all commercial value. For instance, a branded domain name without an active website or customer database may lose its appeal. The identification, securing, and preservation of such elements are therefore essential, notably through a digital inventory and the temporary outsourcing of hosting or server infrastructure.

Conclusion

Managing intellectual property rights during business cessation requires legal foresight and strategic coordination. Supervision by the insolvency practitioner, accurate drafting of transfer documents, and collaboration with authors and creditors are essential to preserve these valuable intangible assets.

The firm Dreyfus et Associés, intellectual property consultants, provides support to businesses seeking to secure and enhance the value of their IP rights, especially during sensitive restructuring or winding-up phases. Our strategic and preventative approach helps clients anticipate risks to their trademarks, patents, and other creations, ensuring both legal and commercial continuity in complex proceedings.

Nathalie Dreyfus with the support of the entire Dreyfus team

FAQ

  1. What happens to intellectual property rights when a company ceases its activity ?

    Patents, trademarks, software, or copyrights do not expire with the company’s closure. Depending on the legal context, they may be sold, transferred, or abandoned. In the case of voluntary cessation, the company may organize the transfer of its intangible assets before being deregistered. In insolvency proceedings (reorganization or liquidation), these rights become part of the estate and are managed by the court-appointed administrator or liquidator. Proper management preserves both legal security and economic value.

  2. Can the insolvency practitioner sell a trademark or a patent ?

    Yes, during a judicial liquidation, the insolvency practitioner acts as a liquidator and may sell intellectual property rights including trademarks, patents, and software. This transaction must be approved by the supervising judge and must be formalized in a clear contract, explicitly identifying the titles being transferred. It must also be registered with the competent IP office (INPI, EUIPO, or EPO) to be enforceable against third parties.

  3. Can a transfer of intellectual property rights be challenged ?

    Yes, a transfer may be disputed if it suffers from formal defects, lacks proper registration, or fails to clearly identify the rights being transferred. Courts emphasize the importance of precision and registration. If a right is not explicitly listed and registered, a third party—such as a former holder or a creditor—may challenge the transfer on legal grounds.