What Happens to a Patent When a Company Gets Dissolved?

Rich Goldstein

Founder & Principal Patent Attorney
A person wearing a blue long-sleeve shirt is holding a black pen to sign on a white paper

When it’s time to close your business, knowing what happens to your intellectual property rights is essential. That includes trademarks, patents, copyrights, trade secrets, and other valuable intangible assets. When a business closes, these intellectual property rights can stay the same.

What Happens to a Patent When a Company Gets Dissolved?

Bona vacantia is the term used to describe this situation. Latin for “vacant goods” or “ownerless goods,” bona vacantia refers to a critical asset left in the dust when a company closes, suffers bankruptcy, or restructures. To avoid your crucial intellectual property or trade secrets becoming bona vacantia, do your due diligence early on and chat with a lawyer.

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Intellectual property holds significant value that a business or legal entity often overlooks. Many companies only realize the importance of this property when they begin the dissolution process and need to divide their intellectual property rights. In some unfortunate cases, entrepreneurs only recognize the significance of intellectual property rights once it’s too late, permanently losing them.

To navigate this tricky situation, working with a trusted intellectual property law firm is a good idea. This is where our team at Goldstein Patent Law comes in. We have the knowledge and experience to help you understand what will happen to your intellectual property rights when closing a shop.

What Factors Determine the Fate of Company Assets After a Business Closes?

When a business closes its doors, the fate of its assets becomes a critical concern. What happens to the equipment, inventory, intellectual property, and other valuable resources accumulated over years of operation? Let’s delve into the factors that influence the disposition of company assets and explore the various options available, shedding light on the complex asset distribution process during a business closure.

  • Liquidation: In the event of bankruptcy or insolvency, assets are typically liquidated and sold to settle outstanding debts.
  • Auction: Assets, including intellectual property, may be sold through auctions to interested buyers, providing an opportunity to acquire them.
  • Transfer to shareholders: In some cases, ownership of assets or intellectual property may be transferred to shareholders if the business closes without selling them.
  • Documentation challenges: Inadequate documentation can complicate the transfer of ownership and may lead to disputes over asset distribution.

Business Structure

When closing a business, the process can vary depending on where and what business entity you have. Some states may have an operating agreement or standard business dissolution procedures. Still, they can also differ depending on the specific entity and county where the business is registered.

For example, let’s say you’re closing down a partnership or a sole proprietorship. In that case, the intellectual property rights might get transferred to the individual partners or the sole proprietor upon the closure of the business.

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What if We’re Talking About a Corporation?

If we’re talking about a corporation, the intellectual property rights could be transferred to the company’s shareholders. Here’s the thing—what happens to the intellectual property rights of a dissolved company can also be influenced by any agreements that were in place before the dissolution.

This is important, and to be noticed. A court or administrator will follow those guidelines if there’s a partnership agreement, limited liability company (LLC) operating agreement, or corporate bylaws that specify how the intellectual property rights will be handled.

All in all, it’s essential to be aware of the specific rules and agreements in your jurisdiction and seek professional advice from a lawyer if you need clarification on how your intellectual property rights will be affected.

Reason for Dissolution

Was the business dissolved due to a merger or acquisition? When a business dissolves through a merger or acquisition, the intellectual property rights don’t just disappear. They just won’t belong to the original company anymore. The acquiring company may gain rights to the intellectual property. If the dissolved company closes due to bankruptcy, the intellectual property may be sold off to make payments to creditors.

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Related Questions

Will I Lose My Intellectual Property Rights if I Go Bankrupt?

All company assets, including intellectual property, are usually liquidated through auctions to settle debts in bankruptcy. Buyers can acquire intellectual property, yet costs are often high. Proceeds from the auction are allocated to obligations like salaries, taxes, creditors, and shareholders.

When founders dissolve a company without retaining intellectual property rights, it is usually sold with other assets. Rarely, if assets or intellectual property are not sold, ownership may transfer to shareholders, but insufficient documentation can complicate the process.

Company founders must understand asset and intellectual property fate during business dissolution. Protecting intellectual property rights is crucial to secure valuable assets even in challenging circumstances. Seek legal advice to navigate complexities, document ownership, and safeguard intellectual property.

Who Owns Patents And Trademarks When A Company Dissolves?

When a company dissolves, the ownership of patents and trademarks depends on various factors. Typically, if the company obtains patents or trademarks, they become the company’s assets. These assets are usually sold or transferred during the dissolution process to settle outstanding debts and obligations. 

Sometimes, the patents and trademarks may be acquired by another company through a merger or acquisition. If no buyer is found, the ownership may revert to the individual shareholders or partners based on the company’s organizational structure. 

It is essential to have proper documentation and legal agreements in place to determine the ownership and fate of patents and trademarks when a company dissolves. Seeking legal advice is recommended to navigate the complexities of such situations.

What Patent Issues Might Arise When You Dissolve A Company?

The dissolution of a business can lead to significant problems related to intellectual property ownership and usage. Defects in the title, resulting from unclear allocation or inadequate documentation, can significantly impact asset value during liquidation. 

Disputes over ownership and usage rights may arise, requiring proactive measures to develop a comprehensive plan with legal assistance. Regularly reviewing and implementing the plan help align it with business objectives and mitigate trade secrets disputes. Founders can protect the integrity and value of their intellectual property, even in the context of business dissolution.

Schedule A Free Strategy Call Today With Goldstein Patent Law

Don’t run the risk of making the same mistakes other businesses have. If your company is dissolving, or you have concerns about your corporation dissolving, talk to an attorney specializing in this area of law. Safeguarding your intellectual property rights is crucial to the company closure process, and you deserve to know what rights to sell and use specific intellectual properties you may have.

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