AI Company Bankruptcies: Navigating Ownership, Valuation, Licensing, and Other Unique Complexities

This CLE webinar will discuss key issues in AI company bankruptcies such as identifying property of the estate, assumption and assignment of executory contracts under Bankruptcy Code Section 365, licensee protections, and Section 363 sales that counsel should consider when representing investors, customers, lenders, debtors, or potential purchasers of AI assets.

Although AI company valuations are at historic highs, these valuations may be difficult to approximate if the company files bankruptcy. Factors to consider include the typical drop after filing, the complexity of the assets, fragmented ownership, data privacy considerations, and potential post-sale liability.  

Counsel should be aware that unlike the assets of traditional technology companies, AI companies have interconnected and "integrated systems" that "challenge traditional concepts of property and transferability," valuation, and monetization. The debtor usually does not "own" anything but uses IP and other rights under contract with third parties. The terms of those contracts and licenses determine if rights can be assumed and assigned, and if they cannot, they may have little value. 

Even if assets can be sold, privacy and other laws may limit a buyer's ability to use the data, making a purchase risky. While the sale of structured data might be attractive, the risk of unknowingly transferring privileged, confidential, or proprietary data could result in third-party liability. 

Listen as our panel of esteemed AI and bankruptcy practitioners discusses evaluating AI assets, executory contracts involving AI companies, licensee protections, and Section 363 sales of AI data and assets.