June 2013
FAQs Chapter 31.10A – Intellectual property and other intangible assets
These FAQs aim to assist official receivers in giving a brief overview of the subject, but for full information they must be read in conjunction with the more detailed guidance given in the main body of the Technical Manual Chapter 31.10A. Links to the chapter paragraphs relevant to the FAQs are included below. Links to other Technical Manual chapters containing related information can be found on the Front Page for this chapter.
What is intellectual property?
Intellectual property is the legal right associated with creations of the mind, e.g. artworks, inventions etc. Formal systems exist to protect the legal rights associated with these creations, e.g. copyright, design right, patent and trade mark. Literary, dramatic, musical and published works are covered, as are sound recordings, films, broadcasts and computer programs. All information relating to intellectual property and intangible assets is now available in Chapter 31.10A.
Can the official receiver collect income relating to copyright, recording or performance rights owned by an insolvent prior to insolvency?
Yes, copyright is an asset, therefore existing copyright relating to any work created by an insolvent prior to the making of an insolvency order vests in the estate of the insolvent. See Chapter 31.10A Part 1, in particular paragraph 31.10A.8.
How do I know if copyright still applies?
In the UK the length of time for which copyright protection is afforded is dependent on the nature of the work as follows:
For further information see Chapter 31.10A paragraph 31.10A.11.
How do I check who owns a copyright on which royalties are due?
Various different societies and organisations exist to collect royalties on behalf of people and organisations holding copyrights, according to whether the company or individual created, performed, recorded or published the work. Full details of all the relevant organisations and who they represent can be found at Chapter 31.10A paragraphs 31.10A.12 to 31.10A.19.
Can a copyright be licensed or assigned, or the licence sold?
Yes – as copyright is an asset it can be transferred to someone else - either in whole or in part (e.g. where film rights are sold for a novel). Any assignment must be in writing and signed by or on behalf of the assignor. Licensing allows a licensee to carry out specific acts in relation to the copyrighted work, (e.g. produce the DVD for a cinematically released film). See Chapter 31.10A paragraphs 31.10A.24 to 31.10A.26.
Can the official receiver disclaim a copyright where the royalty income is low or nil?
Yes, the official receiver can consider disclaiming copyright where there is no royalty generated (e.g. the work is unpublished) or the future costs of administering collections under the copyright are likely to exceed any copyright value or income. See Chapter 31.10A paragraph 31.10A.27.
What do I do where a bankrupt is due royalty payments for a copyright that has been sold before bankruptcy?
Where a copyright has been sold prior to bankruptcy the copyright and royalty rights cannot be realised as assets as they do not vest in the trustee. Instead, remaining royalty payments due to the bankrupt as a condition of sale can be collected as income see Chapter 31.10A paragraph 31.10A.23.
What is a patent?
Generally patents are a deal or bargain between a state and an inventor – an intellectual property right granted by the government of a country as a territorial right for a limited period. The inventor agrees to make public his/her invention for it to be freely copied, after the expiry of an agreed period where he/she has a monopoly over its manufacture, use and sale. In the UK a patent is granted via the UK Intellectual Property Office (formerly the Patent Office) and lasts for 20 years, but must be renewed to keep it in force. See Chapter 31.10A paragraphs 31.10A.55 - 31.10A.56.
Does a patent have a value?
A patent can be bought and sold like any other property, it can generate royalties or be subject to a secured loan by way of a mortgage, or the rights to it can be licensed. Where an insolvent owns a patent (which is in force) at the date of insolvency, it vests in the estate and can be realised as an asset, once ownership has been verified. Where a patent has lapsed the official receiver may need to consider restoring it in order to sell it, see Chapter 31.10A paragraphs 31.10A.56 to 31.10A.63.
Will an insolvent’s computer software be realisable as an intellectual asset?
Most computer software used by an insolvent is likely to be a standard package purchased “off the shelf” so will not be a realisable asset. Where an insolvent is using “bespoke” software (written specifically for the insolvent’s business) or software produced within the business (“in house”) the official receiver should examine any agreements/contracts with the software supplier or in house creator, to ascertain copyright ownership and any intellectual property rights created, also any restrictions on assignment. For further information see Chapter 31.10A paragraphs 31.10A.66 to 31.10A.67.
What about the re-sale of Microsoft volume software licences?
Where the insolvent company or individual has used a Microsoft volume software package for their business, it may be possible to realise some value by arranging for the licence re-sale through specialist agents, see Chapter 31.10A. paragraphs 31.10A.69 to 31.10A.70.
Can a “design” have a monetary value?
Design relates to the outward appearance of a product, rather than to the product itself. Both registered and un-registered designs can be protected, and design rights are an asset that can vest and may have a value. They can also generate income from royalties, which can be collected by the official receiver. For full details on registered designs see Chapter 31.10A paragraphs 31.10A.29 to 31.10A.45 and for unregistered designs paragraphs 31.10A.46 to 31.10A.50.
What about trade marks and service marks?
Trade or service marks (e.g. a logo or graphic such as the Bass red triangle) are usually registered (although this is not compulsory) and can vest in an insolvent’s estate. Where they are vested, they may be sold as an asset. The licence to a trademark can also be sold as an asset. The insolvent may be in receipt of royalties as a condition of the sale of a registered trade mark, although the trade mark will no longer vest. These royalties should be collected by the official receiver as income, including via an IPA or IPO where appropriate. Further information on trade and service marks can be found at Chapter 31.10A Part 4.
Does a company, business or trading name have a value?
Yes, a company, business or trading name can have a value and can be sold by the official receiver, if there is sufficient interest. If the insolvent wishes to purchase the name, it should be independently valued by agents where a satisfactory valuation cannot be agreed. See Chapter 31.10A paragraph 31.10A.108 regarding the use of agents to value a name.
Can the official receiver as liquidator change a company’s registered name in order to facilitate a name sale?
Yes, the official receiver as liquidator can change a liquidated company’s registered name in order to sell the original name; however he/she must pass a special resolution on behalf of the company to change the name, and notify Companies House, for the name change to be valid. See Chapter 31.10A paragraph 31.10A.107 regarding the liquidator’s authority and paragraph 31.10A.109 regarding the procedure to follow with regard to Companies House. See also Chapter 31.10A Annex A which provides a form to use for passing a special resolution.
What does the official receiver have to be aware of when selling a name?
When transferring the registered or trading name of a company, the implications of the Insolvency Act 1986 section 216 must be considered, i.e. the name is prohibited from being used for a period of 5 years by a person who is, or has been, a director or shadow director of the company in liquidation in the 12 months preceding the date of liquidation. Also it is not possible for a limited company to have a name which is the same as a name already appearing in the registrar’s index of company names, therefore where a 3rd party wishes to purchase the registered name of the company in liquidation, it will be necessary to change the name of the company in liquidation at Companies House to allow the purchaser to buy the original name. See Chapter 31.10A paragraphs 31.10A.102 to 31.10A.106.
What else does the official receiver need to be aware of when selling or transferring names?
The official receiver must establish before selling or transferring any registered, business or trading name that he/she will not become liable under the tort of “passing off”, where the name or mark is similar to another business or company or infringes on the goodwill of another company. For a full explanation of the tort of “passing off” and its implications, go to Chapter 31.10A paragraphs 31.10A.93 to 31.10A.94.
What about domain names on the internet – can they be sold or transferred for a value?
Domain names are word sequences, which allow internet users to search and navigate to a specific website. Each domain name is assigned to a specific internet service provider and is registered, and some can be sold for significant amounts of money. Domain names are not owned by the user or registrant, but are licensed by the appropriate registrar for use whilst the licence is paid for. Where a domain name is registered to the insolvent, breaches no trademark and there are no outstanding fees, it can be dealt with as any other asset. For a full outline of the action to take where a domain name exists in connection with an insolvent, go to Chapter 31.10A Part 5 Section E.
Is goodwill an asset?
In insolvency cases where a former business has ceased, its goodwill is likely to be worthless. Goodwill is only likely to have any value where a business is being sold as a going concern. See Chapter 31.10A Part 6.
Can the official receiver sell a client, customer or patient database?
Client lists, customer or patient databases are potential assets which can be sold; the DPA (Data Protection Act 1998) does not prevent the sale of the database containing individuals’ details, as long as certain requirements are met. Specifically, any buyer needs to understand that the information can only be used for its original intended purpose and its usage must be within the reasonable expectations of the individual concerned. As part of the sale the official receiver should obtain an undertaking from the buyers that they will inform the affected individuals who it is that now holds their information. See Chapter 31.10A paragraphs 31.10A.129 to 31.10A.130 for further information.
What Data Protection implications are there in selling a database?
The purchaser of a database may wish to forward marketing material to the individuals on the database. Whether they do this depends on the basis on which the personal information concerned was originally collected. The official receiver should draw the buyer’s attention to the restrictions imposed by the DPA on the use of marketing material and the length of time information can be retained (which should not be longer than is necessary for its original purpose) - see Chapter 31.10A paragraphs 31.10A.131 to 31.10A.132.
What if a buyer cannot be found for the client/customer database?
Where a purchaser cannot be found for the database, or a sale is not able to be concluded, the information held should be deleted or destroyed as soon as it is no longer required, to comply with DPA provisions. See Chapter 31.10A paragraph 31.10A.133.