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Zombie Rights: What happens to Intellectual Property owned by a dissolved company?

A company will be struck off the register if it fails to submit annual returns (since June 2016 referred to as confirmation statements) or otherwise fails to comply with formal requirements. Alternatively, once a company has completed the liquidation process, it will be dissolved.

Few people take the trouble to wonder what happens to any property left behind in the dissolved company. Surprisingly often, this includes valuable intellectual property rights: for example, patents, registered designs and trade marks registered in the former company’s name, or software created by its officers and employees and not assigned prior to dissolution.

The assets of a dissolved company pass to the Crown as bona vacantia (ownerless goods) and getting hold of them after this has happened is by no means easy.

Why might one want to get hold of these rights?

First, it might be necessary for litigation purposes. Many businesses use their trade marks day in, day out, but only check their registrations when it comes to bringing proceedings against infringers. It is far from unknown at this point for the trade mark user to discover that the trade marks have not been assigned out of a former trade mark holding company which has subsequently been dissolved for one reason or another.

Secondly, these discoveries typically come up in the course of due diligence for mergers and acquisitions, and may badly affect the value of a company if not corrected.

What happens if you need to rely on intellectual property rights and the paper trail ends in a dissolved company?

There are two routes, neither of which is guaranteed, quick or cheap.

Option 1: Petition the Crown through the Bona Vacantia Department (“BVD”)

The Crown has a duty to get the best market value for the asset if it chooses to assign it, and has no obligation to assign it to the petitioner, or at all. In cases where the intellectual property right seems to have minimal value the Crown will nevertheless require a stated minimum fee to be paid (for example £1000 per patent plus VAT). The Crown may alternatively require a petitioner to pay for an expert valuation.

In terms of speed, the procedure must be done within the BVD’s specified period.

The petitioner is responsible for providing the following evidence, some of which may prove difficult to gather:

  • Details of the intellectual property and evidence that the dissolved company was the owner of it.
  • An explanation of why the client has an interest in purchasing the intellectual property rights and its future intentions for them.
  • Details of any past and current disputes with respect to the intellectual property.
  • Details of who is currently using the intellectual property.

Option 2: Restore the dissolved company to the register

This procedure is only open where the company was dissolved less than six years ago.

  • Complete form N208 and send to the nearest county court to the company’s (former) registered office that deals with bankruptcy, including court fees and a witness statement.
  • Witness statement must include:
    • Full particulars of the interest of the person signing the Witness Statement.
    • Date of incorporation of the company.
    • Address of the registered office of the company
    • The Memorandum and Articles of Association should be included as an exhibit.
    • Share capital of the company, both authorised and issued and the names of the officers of the company.
    • Full explanation as to why the name of the Company was struck off the Register of Companies.
    • Date of which the Registrar of Companies struck the name of the company off the Register and the date on which the notice of it was published in the London Gazette.

Costs:

  • £155 court fee.
  • £300 for representation from Treasury Solicitor (a formal waiver has to be obtained from the Treasury Solicitors office.)

Reversing the dissolution does not automatically entitle an individual to the asset;  a formal transfer is necessary from whoever is now entitled to act on behalf of the restored company, this may well be the liquidators. They may either refuse to sell or demand a high price for the sale, especially since they are likely to assume that the prospective purchaser is desperate.

The difficulties presented by both routes demonstrate why businesses should always ensure that an assignment of any intellectual property rights which a dormant company may possess should be made before it is struck off the register.

Contact us

For more information, please contact a member of our Intellectual Property Group.