New leading cases on the destiny of sub-licenses when the main license is terminated

Are sub-licenses affected when the main license they are derived from ceases to exist? Last week, the German Federal Court of Justice (Bundesgerichtshof, BGH) issued two decisions dealing with this question and answered with an unequivocal “No”. No written opinion has been published yet (this usually takes a while) so that we have only the official German press release to rely on. But this press release reveals already a few pretty interesting and important things.

To start with, note that the rulings concerned copyright licenses and the court (or at least its press department) made clear that the rulings should be understood as concerning the entire area of intellectual property rights. This is really important, because numerous scholars and courts have to date opined that copyright sub-licenses do not survive the end of the main license. It seems that BGH has effectively put an end to this.

Moreover, it becomes apparent that the court does not make any distinction between the reasons why the main license ended (e.g. termination, revocation for non-exercise under sec. 41 of the Copyright Act, revocation for changed conviction under sec. 42). The scope of the most insightful BGH decision of the last few years regarding above question had been rather narrow, being limited to a revocation on the basis of sec. 41. One caveat however: Should the main license be a time-limited license, the sub-license will certainly not survive the former’s intended end.

Then, the court highlights in a remarkably clear manner that the investments sub-licensees have made need and deserve protection. It correctly points out that prematurely and unexpectedly losing their sub-license due to the lapse of the main license – an event they usually have no influence on – could severely harm sub-licensees, even put their very existence at risk. The court underscores that this is true for the entire area of intellectual property rights. On the other hand, the argument goes on, the main licensor’s interest are sufficiently safeguarded because they can require the original main licensee to cede her/his payment claims against the sub-licensee. This is convincing, and it’s quite promising to see the court recognize the economic reality rather than mere doctrinal considerations.

Finally, the court press release makes an intriguing reference to the current uncertainty in insolvency situations, where the continuation of sub-licenses is on rather shaky ground when the main licensee falls bankrupt. Does this mean that the BGH intends to generally strengthen the sub-licensee’s position in these cases, too (something the German legislator has planned to do for years)? The press release doesn’t tell, so we will only know when the written opinions are published.

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