The German Federal Supreme Court decides over trademark licenses in insolvency proceedings

Insolvency of a licensor can lead to considerable problems for the licensee. Often, the insolvency administrator can, in accordance with Article 103 of the German Insolvency Act, refuse to fulfill the license contract. The result can be that the licensee looses the license, and thereby its use right. In the decision of October 21, 2015, “ECOSIL” I ZR 173/14 the German Federal Supreme Court has mitigated this problem in the case of a trademark license. One guiding principle reads: “In the event of a license acquisition, a license contract is in general completely fulfilled by both parties (Article 103, paragraph 1, German Insolvency Act) if the main mutual obligations are met, i.e. the licensor has granted the license and the licensee has paid the purchase price.” In this case, the insolvency administrator cannot refuse the fulfillment of the contract and the license is “insolvency-proof”.