Canada: New Risks And Rewards For Licensors And Licensees In BIA/CCAA Amendments

On September 18, 2009, after years of Parliamentary delay dating back to 2005, wide-ranging amendments to Canada's Companies' Creditors Arrangement Act (CCAA) and Bankruptcy and Insolvency Act (BIA) (the "Amendments") came into force, providing, among other things, new protections for licensees of intellectual property.

It is important to note that the Amendments only apply in the CCAA restructuring and BIA proposal context, and not to conventional bankruptcies or receiverships.

An insolvent licensor presents risk for licensees.  Prior to the Amendments, intellectual property licensees were at serious risk of having their rights to use licensed intellectual property extinguished in a restructuring proceeding. The Amendments attempt to mitigate this risk, recognizing that intellectual property licences create unique concerns relative to other types of licences and can be of particular significance to a licensee's business. 

Below is a brief summary of the changes licensees and licensors can expect as well as a review of the new bargaining power dynamic as a result of the Amendments.

Enhanced Protection For Licensees

The Amendments create a detailed framework for the disclaimer of contracts generally within a CCAA or BIA proposal proceeding.1  Even if an intellectual property licence has been successfully disclaimed by the licensor in accordance with that framework, the licensee's right to use, or its ability to enforce rights of exclusive use of,  the licensed intellectual property is not affected for the duration of the licence agreement (which includes any rights of renewal).  The right of continued use comes with obligations further described below.

What Is Intellectual Property?

Whereas the US Bankruptcy Code has developed a specific definition of intellectual property for the purposes of legislation analogous to the Amendments and has excluded certain items such as trade-marks, the Amendments provide no such definition.  Arguably anything with an intellectual or knowledge-based component could be intellectual property, even if it does not fit into one of the categories traditionally thought to be included within the scope of that term. 

Uncertain Licensee Obligations

The right to continued use is conditional upon the licensee's continued performance of "its obligations under the agreement in relation to the use of the intellectual property." This condition may be problematic if, for example, a single fee is owed for both the use of intellectual property and the licensor's provision of support - is the licensee expected to continue to pay for all or a pro-rated portion of that fee post-disclaimer? A licence agreement drafted with the Amendments in mind could solve this problem.

Depreciation Concerns

From the licensee's perspective, the ability to continue using licensed intellectual property may be of dubious value where the licensed intellectual property requires extensive ongoing maintenance, support and upgrade from the licensor.  The Amendments create no obligation for the licensor to continue to provide support services in accordance with the disclaimed licence or even to maintain the intellectual property (which may have particularly detrimental effects on trade-mark rights).  Practically speaking, there is often little incentive for a cash-strapped licensor to invest in maintaining its intellectual property, so this is a legitimate concern.

Licensees: New Bargaining Power?

The Amendments establish intellectual property licensees as key stakeholders at the negotiating table in restructuring scenarios, particularly in the case of debtor companies that have licensed their intellectual property extensively. 

If the licensed intellectual property can be used exclusively by the licensee without much support or maintenance (or such support or maintenance could be procured from a third party), it would be difficult or costly to persuade a licensee to agree in a restructuring context to concessions in respect of its rights to exclusively use the licensed property.  In such a case, a licensee is in a strong position to resist any concessions or compromises that other stakeholders in an insolvency may attempt to force upon it, or at the very least demand a high price for such concessions.

On the other hand, if the licensor's support and maintenance services are integral to the licensee's continued use of the intellectual property, the licensee will have a greater incentive to waive some of its continued use rights in return for a new licensing arrangement, perhaps with a new licensor, that assures continued maintenance of that property. 

Marketing Intellectual Property Despite The Amendments

Insolvent companies often attempt to sell large portions of their assets as part of their restructuring efforts.  By making licensed intellectual property less marketable to potential third party purchasers, the Amendments may frustrate an insolvent company's restructuring efforts. This is the balance that has been struck between the rights of licensors and licensees.  Nothing in the Amendments precludes a straight assignment of a licensing agreement to a new licensor.  To the degree that assignment provisions can be built into a licence agreement, this would be of assistance in marketing intellectual property in a restructuring.  Again, however, this would not dispense with the licensee's continued right to use or exclusive use.   

Bankruptcy And Receivership Considerations

As stated above, the Amendments do not provide protection to licensees in a standard bankruptcy or receivership scenario.  Nothing in the Amendments prevents a receiver or bankruptcy trustee of the licensor from fully disclaiming a licence.  Generally speaking, this would leave the licensee with only an unsecured claim against the licensor's estate, which would be worth little or nothing. 

However, some argue that a licence (especially an exclusive and perpetual licence) creates a proprietary right for the licensee in the intellectual property.  This would present challenges to a receiver or trustee in bankruptcy who attempts to assign the intellectual property or prevent the licensee's continued use of it. This issue has yet to be fully considered by Canadian courts.


The Amendments clearly enhance the bargaining position of licensees in an insolvency scenario.  With that in mind, the consequences of insolvency should become a key consideration for both licensees and licensors entering into new licensing arrangements and reviewing existing licensing arrangements.


1. In the event that consent to the disclaimer is not obtained from both the counterparty to the contract and the CCAA monitor or the BIA proposal trustee, as applicable, the court will be called upon to make a determination on the disclaimer.  The following factors will frame the court's analysis:

(a)   whether the proposal trustee or monitor approved the disclaimer;

(b)   whether the disclaimer would enhance the prospects of a viable proposal or compromise or arrangement being made; and

(c)   whether the disclaimer would likely cause significant financial hardship to a party to the contract.

About Ogilvy Renault

Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at

Voted best law firm in Canada two years in a row.
2008 and 2009 International Legal Alliance Summit & Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.