“Take Five” – Sub-licence Survives Expiry of the Master Licence

In a judgment issued yesterday, the Federal Supreme Court (Bundesgerichtshof) decided a question that until now was heavily disputed, namely the fate of the sub-licence in case of the insolvency of the master licensee. In one of the cases before the Federal Supreme Court, the claimant owned the rights to Paul Desmond’s “Take Five”.

The claimant had granted an exclusive licence for the European rights to a licensee, who in turn had granted sub-licenses to the defendant for Germany and Austria. When the master licensee became insolvent, claimant argued that as a result of the master licence having been terminated, the sub-license also had come to an end. Whilst the court of first instance had found for the claimant, both the Munich Court of Appeals and the Federal Supreme Court held in favour of the sub-licensee.

In short, the Federal Supreme Court held the sub-licensee remains protected even if there is a succession in the ownership in the underlying rights, whether as a result of insolvency or otherwise. Only such an interpretation would give the sub-licensee the required level of legal certainty and would enable the sub-licensee to recoup any investments made under the sublicense.

As an aside, it is worth noting that the “Take Five” matter went through the ranks of the German judiciary very quickly, with a first instance judgment handed down in March 2010, the Munich Court of Appeals ruling in January 2011 and the Federal Supreme Court in July 2012.

 

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