In PPG Industries, Inc. v. Guardian Industries Corp., after a merger where the transferor does not survive, what happens to nontransferable, nonassignable patent licenses?

In PPG Industries, Inc. v. Guardian Industries Corp., after a merger where the transferor does not survive, what happens to nontransferable, nonassignable patent licenses?

• A. They do not transfer to the surviving corporation
• B. They are void and terminated
• C. They must be renegotiated
• D. They automatically transfer to the surviving corporation

Answer: (A)

A patent license that is nontransferable stays with the party that held it and cannot ride along to a surviving corporation in a merger. A license is a contract, and a nonassignment clause means the rights cannot be transferred to another entity without the licensor’s consent. If the transferor ceases to exist in the merger, there is no automatic mechanism to push that license onto the surviving company, so the license rights do not transfer by operation of law. The licensor would have to consent to an assignment or the parties would renegotiate a new license for the surviving entity.

A patent license that is nontransferable stays with the party that held it and cannot ride along to a surviving corporation in a merger. A license is a contract, and a nonassignment clause means the rights cannot be transferred to another entity without the licensor’s consent. If the transferor ceases to exist in the merger, there is no automatic mechanism to push that license onto the surviving company, so the license rights do not transfer by operation of law. The licensor would have to consent to an assignment or the parties would renegotiate a new license for the surviving entity.