I don't know exactly what happens in a Chapter 11

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Stepping back for a moment, let's put ourselves in the shoes of the person who has licensed intellectual property from a licensor who subsequently becomes bankrupt. In this scenario, when the license is an exclusive one, then it is treated as an executory contract. The licensor cannot sell those rights to anyone else, no more than the licensee can stop paying royalties. See Encino Bus. Management, Inc. v. Prize Frize, Inc. In those cases where the license is non-exclusive, Section 365(n) of the Chapter 11 Bankruptcy Code states that if the trustee or the Chapter 11 Debtor rejects "an executory contract under which the debtor is a licensor of a right to intellectual property", the licensee under the contract may:

1) treat the license as terminated and assert a claim for breach of contract; or

2) elect to retain its rights to the use of the intellectual property as such rights existed immediately before the commencement of the bankruptcy case, or the duration of the contract. 11 U.S.C. 365(n)(1)(

Thus, no matter what they choose the the licensee must be allowed to exercise either of its rights, and it must continue to make payments for the rights it is licensing for the duration of the contract.

It is important to note though that Section 365(n) does not apply to ALL contracts which contemplate or involve intellectual property. Rather, the contract must be one which the debtor is a "licensor of a right to intellectual property".

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