Latest Articles

The Financially Troubled Company

You Say You Want A Dissolution: An Overview Of The Formal Corporate Wind Down

5802530663_45c7b853d7_z (1)

Winding Down. If a corporation’s board of directors decides that the business needs to be wound down, there are a number of legal paths to consider. Determining the best approach is fact-dependent, and the corporation and its board should get legal advice before making a decision. Sometimes a bankruptcy filing is needed, either a Chapter 11 reorganization (perhaps to complete a going-concern sale) or a Chapter 7 liquidation bankruptcy (in which a trustee will be appointed to liquidate the business). In other cases, an assignment for the benefit of creditors might be a good choice.

A Delaware Corporate Dissolution. This post takes a high-level look at another, often simpler option: the corporate dissolution.  It assumes that the business is a Delaware corporation, since many corporations incorporate there. The laws of the state of incorporation govern the dissolution process, so it’s important to remember that the process described below will differ if the business is incorporated in another state.

Why A Corporate Dissolution? Corporations typically choose to do a corporate dissolution when they don’t need bankruptcy protection (and prefer to avoid filing bankruptcy) but want to have the corporation formally wound down. The dissolution process can be less expensive than other alternatives, particularly when litigation or disputes over claims is unlikely.

  • When properly conducted, a dissolution can bar late claims against the corporation and provide directors with protection from personal liability to claimants.
  • Unlike a bankruptcy filing (but similar to an assignment for the benefit of creditors), a dissolution requires shareholder approval; that often makes it a better fit for privately held corporations.
  • A dissolution typically requires at least one director to supervise the process and at least one officer to manage the wind down and liquidation, although some professional firms will step into those roles.
  • Corporations often elect to dissolve at a point when they anticipate being able to pay creditors in full and return some funds to shareholders or, if they are insolvent, find their creditors generally to be cooperative. If the corporation has a bank or other secured creditor, it helps if they are willing to work with the corporation to liquidate the assets without a foreclosure.

A Corporation In Dissolution. Under Delaware law, once the dissolution commences the corporation is no longer permitted to operate as a normal business. Instead, as the Delaware statute provides, the corporation continues only “gradually to settle and close their business, to dispose of and convey their property, to discharge their liabilities and to distribute to their stockholders any remaining assets, but not for the purpose of continuing the business for which the corporation was organized.” The corporation is allowed up to three years to complete the dissolution process; if more time is required, a request has to be made to the Delaware Court of Chancery (although a corporation in dissolution remains in existence, without having to go to the Chancery Court, to complete lawsuits that are pending when the three year period expires).

Key Aspects Of A Dissolution. To give you a sense of the process involved, below is a list of some of the main steps in a dissolution. However, please note that important details go beyond the scope of this post. Examples include special voting procedures that may be required if preferred stock has been issued, possible alternatives to the claims process, establishing reserves for claims, payment of the costs of the liquidation, winding down subsidiaries, and the impact of foreign affiliates. It bears repeating: a corporation considering a dissolution should get legal advice on all aspects of the process.

With that caveat, a dissolution generally involves the following:

  • Board approval of a decision to dissolve and adoption of a plan of liquidation;
  • Shareholder approval of the dissolution and plan of liquidation in requisite majorities as provided under the corporation’s then-current Certificate of Incorporation;
  • Filing of a Delaware Annual Franchise Tax Report and payment of franchise taxes, including a partial-year final franchise tax report;
  • Filing a Certificate of Dissolution with the Delaware Secretary of State’s office;
  • Timely reporting to the Internal Revenue Service of the dissolution;
  • A formal claims process, with at least 60 days notice to potential claimants of the dissolution and deadline to file claims, together with publication of the notice in required newspapers;
  • Review of filed claims, with appropriate offers to claimants or rejections of claims;
  • Resolution of any lawsuits, including any timely-filed by claimants whose claims the corporation rejected;
  • Liquidation of remaining corporate assets in accordance with the plan of liquidation;
  • Preparation and filing of all final tax returns;
  • Withdrawals or surrender of qualifications to do business in other states; and
  • Final distributions to creditors and, if funds remain, to applicable shareholders.

Conclusion. In the right situation, a dissolution can be the best approach to formally wind down a corporation’s business and corporate existence. As with all corporate governance matters, however, the corporation’s board and management should get legal advice tailored to the corporation, its business, and creditors, and guidance throughout the dissolution process.

 

Image courtesy of Flickr by JBrazito

Business Bankruptcy Issues Recent Developments

What Did The ABI Chapter 11 Commission Recommend On Intellectual Property Licenses And Bankruptcy Issues?

3089698096_e33b630292_z

The American Bankruptcy Institute‘s Commission to Study the Reform of Chapter 11 issued its report last week, capping more than two years of hearings, meetings, and hard work. Having had the honor of testifying before the Commission on intellectual property and bankruptcy issues at one of its hearings in New York in June 2013, I wanted to take a closer look at its intellectual property recommendations when a licensor or licensee files bankruptcy.

You can download the Commission’s entire report for all the details, but the Commission’s main IP recommendations address five key issues:

  1. Should rejection of an intellectual property license under Section 365(g) terminate an IP licensee’s rights to the IP (absent Section 365(n) protection);
  2. Should a bankrupt licensee or trustee be able to assume an in-bound IP license;
  3. Should a bankrupt licensee or trustee be able to assign an in-bound IP license;
  4. Should Section 365(n) expressly cover foreign IP when a licensor is in bankruptcy; and
  5. Should trademarks be covered by Section 365(n)’s protections when a licensor is in bankruptcy?

Let’s examine the Commission’s recommendations on each in turn.

The Consequences Of Rejection. A threshold issue addressed was the proper impact of rejection of an executory contract, including an intellectual property license, under Section 365(g). The Commission recommended that rejection end a non-debtor counterparty’s right to continued use of property of the estate, subject to specific protections such as Section 365(n). In doing so, it appeared to follow the long-standing Fourth Circuit decision in Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985) and not the Seventh Circuit’s more recent decision in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC,  686 F.3d 372 (7th Cir. 2012). As a side note, the Commission also recommended that all IP licenses be deemed executory. In combination, these positions would make the scope of Section 365(n) even more important and, as we will see on the final two questions, the Commission had a series of specific recommendations on Section 365(n) protections.

Resolving The Hypothetical/Actual Test Issue. A key question that arises when a licensee files bankruptcy is whether the debtor licensee can assume an in-bound license of another party’s intellectual property. The circuits have split on this “hypothetical vs. actual test” reading of Section 365(c)(1) and the Commission sided squarely with the actual test when a debtor in possession, as licensee, proposes to assume but not assign an IP license. The Commission believed a licensor would be receiving the benefit of its bargain in that situation since the debtor in possession as licensee would be assuming, and therefore continuing to perform under, the license. This makes sense for a debtor in possession, but the Commission’s recommendation speaks of the right of a “trustee” to assume a license, which would introduce a new party (the trustee) in the role of licensee. Although a full discussion of this “hypothetical vs. actual test” split is beyond the scope of this post, you can read about it — and the Supreme Court’s interest in the issue a few years ago– in this earlier post discussing the issues, or of course in the Commission’s report.

Making IP Licenses Assignable To Non-Competitors. In addition to voting to codify the actual test when a debtor in possession or trustee proposes to assume an IP license, the Commission also recommended that debtor licensees and their trustees be permitted to assign those licenses to a single assignee under Section 365(f), notwithstanding applicable nonbankruptcy law such as federal patent, copyright, or trademark law, or any contrary provision in the license.

  • If the proposed assignee is a competitor of the licensor or an affiliate of such competitor, the Commission recommended that the bankruptcy court be permitted to deny the assignment if it determined, after notice and a hearing, that the harm to the nondebtor licensor resulting from the proposed assignment “significantly outweighs the benefit to the estate derived the assignment.”
  • The burden of proof would be on the nondebtor licensor in such a hearing.
  • If adopted, this would make in-bound IP licenses more assignable in bankruptcy than out, similar to non-residential real property leases, and licenses could potentially become a source of value for creditors.
  • However, even if owners of patents, copyrights, and trademarks could accept adoption of the actual test for assumption of IP licenses, they might have a harder time giving up control over whether and to whom licenses of their IP could be assigned.

The Foreign IP Issue. Section 101(35A) of the Bankruptcy Code defines “intellectual property” for purposes of the protections of Section 365(n), using either general terms or references to provisions of the United States Code. The Commission seemed to believe foreign IP was not covered by the current definitions (although several arguments suggest that it is), and to resolve any uncertainty the Commission recommended that foreign patents and copyrights expressly be included in Section 101(35A)’s definitions. It found no reasonable basis for treating foreign IP differently. In addition, the Commission recommended that foreign trademarks also be included in this definition subject to the same limitations and conditions, discussed below, as it proposed should apply to domestic trademarks.

Giving Trademark Licensees Protections Under Section 365(n). An important recent trend at the intersection of IP and bankruptcy law has been the efforts of courts to protect trademark licensees from the effects of rejection of their licenses by trademark licensors in bankruptcy. The Third, Seventh, and Eighth Circuits have sided with trademark licensees in recent cases, and a New Jersey bankruptcy court recently went so far as to extend Section 365(n) protections to trademark licensees on equitable grounds. In addition, the House of Representatives (but not the Senate) passed the Innovation Act, which would have added trademarks to Section 101(35A) and therefore grant them Section 365(n) protection. Addressing this issue, the Commission recommended the following:

  • Trademarks, service marks, and trade names as defined in Section 1127 of Title 15 of the U.S. Code should be added to the definition of Section 101(35A).
  • If the trustee or debtor in possession rejects a license of a trademark, service mark, or trade name, Section 365(n) would apply with certain modifications. First,  the nondebtor licensee would be required to comply with the license and related agreement, including with respect to (i) the products, materials, and processes the license permitted or required, and (ii) its obligations to maintain sourcing and quality of the licensed products or services. The trustee (or debtor in possession) should maintain the right to oversee and enforce quality control but without any continuing obligation to provide further products or services.
  • The concept of “royalty payments” would be expanded to include “other payments” contemplated by the license of the trademark, service mark, or trade name.

These trademark recommendations are similar to the Innovation Act’s provisions and, as such, might find support in Congress.

Conclusion. The ABI’s Chapter 11 Commission has presented a comprehensive set of recommendations on many fundamental aspects of Chapter 11. In its intellectual property recommendations, the Commission tackled some of the most common bankruptcy and IP issues being litigated today. If enacted by Congress, its recommendations would resolve circuit splits, clarify licensee and licensor’s rights in bankruptcy, and squarely extend protection to trademark licensees. Whether or not you agree with every recommendation, the Commission should be commended for its serious, thoughtful, and diligent effort to improve Chapter 11 for debtors, creditors, and the general public.

Image Courtesy of Flickr by O Palsson

Business Bankruptcy Issues Recent Developments

Amendments To The Federal Rules Of Bankruptcy Procedure, Including One Shortening The Time For Serving A Summons, Take Effect December 1, 2014

Summons2 IMG_2094

Almost every year, changes are made to the set of rules that govern how bankruptcy cases are managed — the Federal Rules of Bankruptcy Procedure. The changes address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others.

Rule Amendments. This year the rule amendments, which go into effect on December 1, 2014, mainly address bankruptcy appeals, as well as an important one on service of a summons (discussed below).

  • Follow this link for a copy of the amendments, in both clean and redline, together with the transmittal letters and helpful Advisory Committee comments.  
  • This year’s rule changes include revisions to the Federal Rules of Appellate Procedure governing bankruptcy appeals, including direct appeals from a district court exercising bankruptcy jurisdiction, rule and form revisions regarding elections to appeal to a bankruptcy appellate panel or a district court, rules favoring the use of electronic notice in bankruptcy appeals, the impact on a bankruptcy appeal of a post-judgment motion for a new trial or to amend a judgment, and technical amendments to implement these revisions. 

No Waiting On Service Of A Summons. Aside from the appeals-related amendments, one rule change will impact every bankruptcy lawyer that files an adversary proceeding, the bankruptcy term for a lawsuit filed within a bankruptcy case.

  • Federal Rule of Bankruptcy Procedure 7004(e) has been revised to require service of a summons in an adversary proceeding within seven days of its issuance, cutting in half the fourteen day time period that had previously been permitted.
  • Although nationwide service of process via U.S. mail is still allowed as before, the summons and complaint will need to be served promptly after issuance of the summons. Otherwise, the originally issued summons will become “stale” — meaning ineffective — and a new summons will have to be issued and promptly served.
  • Why the change? In adversary proceedings, Federal Rule of Bankruptcy Procedure 7012(a) provides that a defendant has 30 days from the date the summons is issued to respond, not from the date of service. The rule change will give defendants an extra week, give or take depending on the mail, to respond to a complaint.

Revised Bankruptcy Forms And Fees. To implement the rule amendments, several national bankruptcy forms will also be revised. Copies of the revised bankruptcy forms are available at the link in this sentence, and you should also check your local bankruptcy court’s website for local rule and form revisions. There are also fee changes, specifically, the fee for direct appeals from the bankruptcy court to the court of appeals goes up, and a new $25 fee kicks in for redacting documents previously filed in a bankruptcy case.

Business Bankruptcy Issues Recent Developments

The Trend Of Protecting Trademark Licensees In Bankruptcy Continues: For The First Time A Court Extends Section 365(n) Protections To Trademark Licensees On Equitable Grounds

3990917040_5339950e40_z

If you doubted it before, you can stop now. The trend of courts finding ways to protect trademark licensees from the harsh effects of losing their trademark license rights in bankruptcy is in full swing.

The latest example comes in the Crumbs Bake Shop, Inc. Chapter 11 bankruptcy case in New Jersey. On October 31, 2014, Judge Michael B. Kaplan of the U.S. Bankruptcy Court for the District of New Jersey rejected a motion by the buyer of the assets of Crumbs to clarify, among other things, that it purchased the Crumbs trademarks free of trademark licenses previously entered into by Crumbs. In a 22-page revised decision dated November 3, 2014, Judge Kaplan identified three issues facing the court:

I. Whether trademark licensees to rejected intellectual property licenses fall under the protective scope of 11 U.S.C. § 365(n), notwithstanding that “trademarks” are not explicitly included in the Bankruptcy Code definition of “intellectual property”;

II. Whether a sale of Debtors’ assets pursuant to 11 U.S.C. § 363(b) and (f) trumps and extinguishes the rights of third party licensees under § 365(n); and

III. To the extent there are continuing obligations under the license agreements, which party is entitled to the collection of royalties generated as a result of third party licensees’ use of licensed intellectual property.

Let’s examine how the court addressed these three issues, one by one. As discussed below, the court’s Section 365(n) analysis raises the most questions.

Another Lubrizol Rejection. Before turning to the Section 365(n) question, the court first looked at the impact of rejection on an intellectual property license. The court examined the 1985 Fourth Circuit decision in Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985), which held that, upon rejection of a license agreement by a debtor-licensor, the licensee loses its rights to the intellectual property. The Crumbs bankruptcy court stated that it “is not persuaded by the decision.” It cited the Seventh Circuit’s decision in the Sunbeam Products case (which disagreed with Lubrizol‘s interpretation of the effect of rejection under Section 365(g)), and noted that it is “not alone in finding that its reasoning has been discredited.” The Crumbs court decided not to follow Lubrizol but did not adopt the Seventh Circuit’s approach to the issue. Instead, it turned to Section 365(n) and equitable considerations.

Section 365(n) And Trademarks. The court reviewed the language and legislative history of Section 365(n) of the Bankruptcy Code and its companion definition of “intellectual property” in Bankruptcy Code Section 101(35A). Looking at Third Circuit precedent, it examined Judge Ambro’s concurrence in the Third Circuit’s 2010 decision in In re Exide Technologies. The Crumbs court then considered the consequences of the congressional decision not to include trademarks in Section 101(35A)’s definition of intellectual property.

  • Like Judge Ambro in Exide Technologies, the bankruptcy court pointed to the passage in the legislative history of Sections 365(n) and 101(35A) about postponing congressional action on trademark licenses “to allow the development of equitable treatment of this situation by bankruptcy courts.”
  • The Crumbs court stated that reasoning by negative inference — and thereby to hold that Congress’s omission of trademarks from Section 101(35A)’s definition of intellectual property means that Section 365(n)’s protections do not extend to trademarks and trademark licensees lose their rights — would be improper.
  • The court concluded that “Congress intended the bankruptcy courts to exercise their equitable powers to decide, on a case by case basis, whether trademark licensees may retain the rights listed under § 365(n)” and found “it would be inequitable to strip” the trademark licensees “of their rights in the event of a rejection, as those rights had been bargained away by Debtors.”
  • The Crumbs court also commented on the passage of the Innovation Act by the House of Representatives, which if enacted would add trademarks to Section 101(35A)’s definition of intellectual property. While not dispositive, the court noted that the legislation showed that Congress was aware of the prejudice to trademark licensees that would result from the position advanced by the buyer.
  • Without explicitly holding that Section 365(n) itself applies to all trademark licenses, the Crumbs court granted the trademark licensees Section 365(n)’s protections on equitable grounds.

A Closer Look At The Court’s Section 365(n) Analysis. The Crumbs decision appears to be the first holding that Section 365(n)’s protections can be extended to trademark licensees, despite Section 101(35A)’s intentional omission of trademarks. The other courts protecting trademark licensees, including the Third and Eighth Circuits, found the trademark licenses at issue no longer executory, while the Seventh Circuit in Sunbeam Products held that rejecting a trademark license does not terminate the licensee’s IP rights. Although the Crumbs court did not expressly hold that Section 365(n) applies to trademark licenses in all cases, the court held it could invoke the specific protections of Section 365(n) (and that section’s royalty requirements) for trademark licensees on equitable grounds.

Does “Means” Mean Anything? Although the Crumbs court’s result is consistent with the recent trend, its analysis is questionable. Extending Section 365(n) rights to trademark licenses, even on an equitable basis, appears to conflict with the statute’s language. Section 101(35A), the definition of intellectual property on which Section 365(n) is based, begins with “The term ‘intellectual property’ means” and then lists six specific categories of intellectual property. As we know, trademarks, service marks, and trade names are not among them. Section 101(35A)’s use of the word “means” is significant, notwithstanding the legislative history about the development of equitable treatment, a subject on which the statute itself is silent. The bankruptcy court’s decision in Crumbs did not discuss the use of the term “means” in Section 101(35A), but that term and its significance has been construed by the U.S. Supreme Court in another context.

  • In Burgess v. United States, 128 S.Ct. 1572 (2008), citing 2A N. Singer & J. Singer, Statutes and Statutory Construction § 47:7, pp. 298-299, and nn. 2-3 (7th ed. 2007), the Supreme Court held, in the context of a criminal statute: “‘As a rule, [a] definition which declares what a term `means’ … excludes any meaning that is not stated.’ Colautti v. Franklin, 439 U.S. 379, 392-393, n. 10, 99 S.Ct. 675, 58 L.Ed.2d 596 (1979) (some internal quotation marks omitted).”
  • In footnote 3 of the Burgess decision the Court actually examined several Bankruptcy Code definitions, two of which used the term “means,” in support of its statutory construction that “means” is exclusive.
  • Although the Crumbs decision did not hold that Sections 101(35A) and 365(n) apply to trademarks in all cases, it extended Section 365(n) rights, expressly by name, to trademark licensees on equitable grounds. Given Congress’s use of the restrictive term “means” in the statutory definition, and its intentional omission of trademarks, service marks, and trade names from Section 101(35A), extending Section 365(n)’s statutory protections to trademark licensees seems to create an unnecessary conflict with the language of the statute.
  • Instead of invoking Section 365(n), the Crumbs court could have used alternatives approaches to protect the trademark licensees and avoided a conflict with Section 101(35A)’s language. It could have ruled, as Judge Ambro suggested in his Exide Technologies concurrence, that on equitable grounds rejection of a trademark license does not deprive the licensee of its rights. Likewise, it could have held, as the Seventh Circuit did in Sunbeam Products, that rejection does not terminate a counterparty’s license rights at all.

Was The Sale Free And Clear Of The Trademark Licenses? Having concluded that the protections of Section 365(n) should apply to the trademark licensees in this case, the Crumbs court addressed whether the asset sale under Sections 363(b) and (f), which included the trademarks, was “free and clear” of the licensees’ interests. The buyer argued that the licensees were given notice of the proposed “free and clear” sale but failed to object, thereby impliedly consenting to the extinguishment of their Section 365(n) rights. However, after examining the notice given in the case, the Crumbs court concluded that the licensees were not provided with adequate notice that the sale put their rights at risk.

  • The court observed how a party had to “traverse a labyrinth of cross-referenced definitions and a complicated network of corresponding paragraphs with annexed schedules” to determine what was being sold. The court admitted that it had difficulty following the “definitional maze” and observed that “there is no clear discussion as to what rights were purported to be taken away as a result of the sale,” meaning that the trademark licensees had no apparent reason to believe that an objection was needed to retain their rights under Section 365(n).
  • The court acknowledged that a proposed order was part of the Debtors’ moving papers, and “addressed that the sale was to be clear of licensees’ rights.” However, the court noted that this reference was “a mere ten words, buried within a single twenty-nine page document, which itself was affixed to a CM/ECF filing totaling one hundred twenty-nine pages.”
  • Under these circumstances — with no other express reference to the licensees, Section 365(n) rights, or the stripping of those rights — the Crumbs court held it would be inequitable to find that the licensees consented to the termination of their rights.
  • The Crumbs court also held, as a matter of statutory construction, that Section 365(n), a more specific provision, is not overcome by the broad text of Section 363(f) and its free and clear language. “Nothing in § 363(f) trumps, supersedes, or otherwise overrides the rights granted to Licensees under § 365(n).” This ruling again raises the issue whether Section 365(n) can be applied to trademark licenses in the first place.

Which Party Is Entitled To Royalties Under The License Agreements? The court also addressed whether the buyer, as the new owner of the trademarks, or the debtor, as the party to the trademark licenses that were not assigned to the buyer, was entitled to payment of ongoing royalties under those agreements. The court cited the Third Circuit’s decision in In re CellNet Data Sys., Inc., 327 F.3d. 242 (3d Cir. 2003), and its ruling that Section 365(n) links royalties to the license agreement rather than the intellectual property. The Crumbs court concluded that because the license agreements had not been assigned, the buyer did not obtain royalty rights under the licenses going forward (although it did purchase any unpaid pre-closing royalties through its acquisition of accounts receivable). However, since the Debtors no longer owned the trademarks, the court questioned how anyone other than the buyer could perform under the trademark license agreements and, accordingly, concluded that rejection likely is necessary.

Conclusion. Over the past four years, one of the most significant developments at the intersection of IP and bankruptcy law has been how courts have used factual, legal, and equitable approaches to protect trademark licensees from the harsh effects of rejection. The Crumbs case, pending in New Jersey in the Third Circuit, built on Judge Ambro’s concurring opinion in Exide Technologies and extended, on an equitable basis, the protections of Section 365(n) to trademark licensees. However, the Crumbs court seems to have gone too far in applying Section 365(n) itself to trademark licenses — despite the fact that Section 101(35A)’s definition of intellectual property does not include trademarks. Given Section 101(35A)’s use of the restrictive term “means,” the Crumbs court’s statutory interpretation, and its reliance on legislative history, is questionable. Although the Crumbs decision is further evidence of the continuing trend of courts protecting trademark licensees in bankruptcy, courts would be on stronger ground if they did so without applying Section 365(n) itself to trademark licenses.

 

Image Courtesy of Flickr by Steve Snodgrass

Business Bankruptcy Issues Recent Developments

U.S. Supreme Court Denies Review In Jaffe v. Samsung, Letting Stand The Fourth Circuit’s Decision Applying Section 365(n) To Protect Licensees In A Chapter 15 Bankruptcy Case

5554035521_f6b59ccafa_z

On Monday, October 6, 2014, the U.S. Supreme Court issued an order denying the petition for a writ of certiorari in the Jaffe v. Samsung case, also known as the Qimonda case. The Supreme Court let stand the Fourth Circuit’s December 2013 decision that affirmed the bankruptcy court’s order applying Bankruptcy Code Section 365(n) in a Chapter 15 cross-border bankruptcy case.

For a full discussion of the Fourth Circuit’s decision, follow the link to this prior post discussing the case and its implications for intellectual property licensees, Chapter 15 cases, and more. For a quick refresher, here’s the conclusion from that earlier post:

The Fourth Circuit’s Qimonda decision is important for licensees of intellectual property owned by a foreign entity. It signals that U.S. courts will incline to protect licensees by applying Section 365(n) when an insolvent foreign entity’s administrator or other representative asks for assistance from the U.S. bankruptcy courts. However, the Fourth Circuit did not go as far as some licensees would have liked, stopping short of declaring that an attempt to reject licenses without applying Section 365(n) would be “manifestly contrary” to U.S. public policy. That makes the Qimonda decision a helpful, but perhaps not decisive, tool for IP licensees. It of course remains to be seen whether other courts will follow the Qimonda decision or chart a different path.

Image Courtesy of Flickr by Phil Roeder

Business Bankruptcy Issues Recent Developments

A Closer Look At Recent Trends At The Intersection Of Intellectual Property And Bankruptcy Law

5977609373_ee7f95af5b_z (1)

I had the honor of being a panelist at the American Bankruptcy Institute‘s 22nd Annual Southwest Bankruptcy Conference last Friday, speaking on current developments in business bankruptcy. My part of the discussion focused on recent intellectual property and bankruptcy law trends. Among the topics I covered were:

  • the direction U.S. Courts of Appeals have been taking over the last few years in protecting trademark licensees from the harsh effects of rejection of their trademark licenses by a licensor in bankruptcy,
  • whether Section 365(n) of the Bankruptcy Code protecting (non-trademark) IP licensees applies in cross-border cases under Chapter 15 of the Bankruptcy Code, and
  • recent Congressional efforts to reform how IP is treated in bankruptcy cases.

For those who couldn’t attend the conference, you can follow the link in this sentence for a copy of the article I prepared on these topics. I hope you find it of interest.

Image Courtesy of Flickr by BusinessSarah

Business Bankruptcy Issues

Cooley GO: A Great New Resource For Entrepreneurs And Their Companies

Cooley Go

Cooley GO

Earlier this month, Cooley LLP launched Cooley GO, a terrific new resource center for entrepreneurs with businesses at all stages of the growth cycle. Cooley GO is a mobile-friendly microsite that provides a wide range of free legal and business content covering formation, financing, building a team, working with directors and advisors, intellectual property, M&A, IPOs and more.

I have the pleasure of being a contributor to Cooley GO. A new post I wrote called “A Key Customer Filed for Bankruptcy: Should You Keep Doing Business With Them?” is now on the Cooley GO site. To read the article just follow the link in the prior sentence.

Be sure to explore the full Cooley GO site. Among other tools, Cooley GO provides entrepreneurs with the ability to:

I hope you find Cooley GO to be a helpful resource for your business.