.comment-link {margin-left:.6em;}
Tech Bankruptcy
June 22, 2014
  Eight Circuit follows Third Circuit's Exide in En Banc Review of Interstate Bakeries
Complex corporate transactions often include ancillary intellectual property licenses. For various reasons, when one company sells off part of its business operations it may not be able to transfer intellectual property rights to the acquiring entity. Usually, this is because the selling entity still needs to retain the IP rights for the operations it doesn't sell. The parties resolve the problem by licensing the IP to the divested portion of the business - usually these IP licenses are perpetual and fully paid. In intent, the licensee receives the rights to the IP within a particular scope - possibly geographical or perhaps in connection with a specific brand or product.

When the seller files a bankruptcy can it reject these ancillary IP licenses? What if, by so doing, it effectively unwinds a fully completed business divestiture? The Court of Appeals for the Eighth Circuit had to address this issue recently in the Interstate Bakeries Corporation case. The debtor had previously sold off several food brands as part of a business divestiture, but licensed the trademarks instead of assigning them. Now, the debtor sought to reject the trademark license - effectively unwinding the prior business transaction.

In the Exide Technologies case, the Court of Appeals for the Third Circuit had faced a similar situation. It held that the trademark license was not executory because the parties had substantially performed the material provisions of the agreement when the prior business divestiture was completed. The remaining trademark license was thus substantially performed and non-executory. The debtor could not reject it.

The Court of Appeals for the Eight Circuit initially reached a different conclusion, even though on similar facts, holding that the remaining trademark license was executory. In distinguishing Exide, the Eight Circuit noted the existence of additional provisions requiring the licensor to continue to monitor the licensee's use of the marks. These provisions, the Court said, made the license executory.

On En Banc review, the full Court of Appeals reversed. Following Exide, it reviewed the license agreement as part of an integrated sale agreement, which it held had been substantially performed. Along the way, the court discussed the concept of considering the IP license in context. The Court felt that the central purpose of the agreement was the sale of certain brands and related operations to the buyer - not a trademark license. The trademark license itself was an ancillary part of the transaction and, thus, the remaining unperformed terms were not material.

Labels: , , , ,

 
Comments: Post a Comment



<< Home
A blog discussing the impact of technology on bankruptcy law and practice.

rss Subscribe to Posts

My Photo
Name:
Location: Boston, Massachusetts, United States

Warren E. Agin is a partner in Swiggart & Agin, LLC, a boutique law firm in Boston, Massachusetts focusing on the needs of technology companies. Mr. Agin heads its bankruptcy department. The author of the book Bankruptcy and Secured Lending in Cyberspace (3rd Ed. West 2005), Mr. Agin also chaired the ABA's E-commerce and Insolvency Subcommittee from 1999 to 2005, co-chaired the Boston Bar Association's Internet and Computer Law Committee (2003-2005), and served on the American Bar Association's Standing Committee on Technology and Information Services (2008-2011). Mr. Agin currently co-chairs the Editorial Board of Business Law Today. A contributing editor to Norton Bankruptcy Law and Practice, 3d, and co-author of its chapter on intellectual property for the past fifteen years, he is author of numerous legal articles and addresses on topics of technology, internet and bankruptcy law.

ALL POSTS
Eight Circuit follows Third Circuit's Exide in En Banc Review of Interstate Bakeries
ARCHIVES
August 2004 / October 2006 / November 2006 / December 2006 / February 2007 / March 2007 / April 2007 / May 2007 / June 2007 / July 2007 / September 2007 / October 2007 / November 2007 / February 2008 / March 2008 / April 2008 / September 2008 / October 2008 / November 2008 / December 2008 / January 2009 / February 2009 / March 2009 / April 2009 / August 2009 / January 2010 / February 2010 / March 2010 / April 2010 / November 2013 / December 2013 / January 2014 / February 2014 / March 2014 / April 2014 / May 2014 / June 2014 / November 2014 /


Powered by Blogger