What Happens to Intellectual Property Rights When a Business Dissolves

Intellectual property (IP) is often a more valuable asset than businesses realize. Sometimes businesses understand the value of their IP only once they start to dissolve their company and have to divide their intellectual property rights. Other times, entrepreneurs do not understand how important IP rights are until it is too late, and their IP rights are lost forever.

If you are ever in the situation of closing shop, you should understand what happens to the company’s IP rights when a business dissolves. Intellectual property rights can include trademarks, patents, copyrights, trade secrets, and more. IP rights can be extremely valuable. However, when a company dissolves, these rights may be transferred, sold, or even lost. Working with a Florida intellectual property lawyer can help you sort out your IP rights when terminating a business. If you need help understanding your intellectual property rights when a business dissolves, BrewerLong can help.

What Type of Business Entity Is Being Dissolved?

The process of dissolving a business can vary depending on the jurisdiction and the type of business entity. While there are some dissolution processes that are standard across Florida, some termination proceedings can vary by business entity and county.

For example, if you are terminating a partnership or sole proprietorship, the intellectual property rights may be transferred to the individual partners or the sole proprietor. 

If the business is a corporation, the IP rights may be transferred to the company’s shareholders. However, what happens to intellectual property rights when a business dissolves can also depend on agreements that were in place before the dissolution. If a partnership agreement, limited liability company (LLC) operating agreement or corporate bylaws specify how IP rights will be disposed of, then a court or administrator will follow that agreement.

Is the Dissolution Due to a Merger or Acquisition?

In the case of a merger or acquisition, the acquiring company may gain the intellectual property rights of the dissolved company. This can include trademarks, patents, copyrights, and trade secrets. The acquiring company may then use these rights to continue to operate the business or to integrate the acquired assets into its operations. In this case, what happens to the intellectual property rights when the business dissolves is not exactly the same as if the business were simply closing up shop. However, the IP will no longer belong to the original business entity.

Is the Dissolution Due to Bankruptcy?

When a company dissolves through bankruptcy, the intellectual property rights may be sold off to pay creditors. This can include trademarks, patents, copyrights, and trade secrets. These assets can be sold to other businesses or individuals, who can then use them to continue to operate the firm or to create new products or services.

What Should You Do If You Lose Your Intellectual Property Rights Due to Business Dissolution?

Unfortunately, in some cases, intellectual property rights may be lost completely when a business dissolves. This can happen when the rights are not adequately protected or the firm needs more resources to protect its rights and is unable to obtain the capital to keep registrations up. For example, if a company does not renew its trademark registration or has inadvertently let it lapse, the rights to that trademark might be lost.

It is important to note that the dissolution of a business does not automatically cancel any pending patent or trademark applications or registrations. If an individual or entity has filed for a patent or trademark application, those rights will remain in force, and the applicant or owner has to decide what to do with them if the mark or patent is granted.

Protecting Your IP Rights Before Dissolution

To protect intellectual property rights before a business dissolution, businesses should consider ensuring that all trademarks are properly renewed and patents are properly registered. Protecting your IP can also include transferring the rights to a third party, licensing the rights, or selling the rights to another company. What happens to intellectual property rights when a business dissolves depends mainly on how you treat your intellectual property before closing your business. An experienced IP lawyer can help with guidance on the specific laws and regulations regarding intellectual property rights in your jurisdiction.

How BrewerLong Can Help You Protect Your IP

If you need help registering a trademark or protecting one that already exists, BrewerLong can help. We can help you protect your IP long before business dissolution becomes an issue for your partnership or LLC. Our experienced attorneys share the goal of providing an outstanding customer experience. We give every client the close personal attention they deserve so we can provide clear and practical guidance through their most complicated legal situations. Contact BrewerLong today, and we will focus on the law so you can focus on your business.

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