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An extension of these decisions prevents not only assignment of patent and copyright license rights but mere assumption by a reorganizing debtor. Section 365(c) uses the language "the trustee may not assume or assign any executory contract or unexpired lease of the debtor." One line of cases, which adopt a "hypothetical test" in interpreting the use of the word "or" in Section 365(c), holds that the section restricts the estate's assumption of an executory contract when a hypothetical assignment would be prohibited. Another line of cases concludes that restricting assumption merely because applicable law prohibits assignment is nonsensical; applying an "actual test," the cases hold that. Section 365(c) limits assumption only when the trustee intends to assign the assumed contract subsequently.
The Ninth Circuit adopted the hypothetical test in In re Catapult Entertainment, Inc.t and held a debtor could not assume rights under a nonexclusive patent license over the licensor's objection.
However, in Institut Pasteur, the Frost Circuit Court of Appeals applied the actual test, based on its earlier decision in In re Leroux. The court suggested using a case-by-case inquiry into whether the licensor was being forced to do business with someone other than its original licensee. This approach adopts some sensitivity toward the rights of the licensee to make sure it receives the full benefit of the license.
Rci Technology Corp. v. Sunterra Corp. (In re Sunterra Corp.), 361 F.3d 257 (4th Cir. 2004).
In perhaps the most significant decision in the arena, the Court of Appeals for the Fourth Circuit followed the Catapult decision to strip from a software licensee rights under a fully paid software
