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Tech Bankruptcy
February 23, 2007
  Copyright owner snipes at bankruptcy sale
A recent District Court decision, Bryant v. Gordon, 2007 WL 461326 (N.D. Ill. Feb. 8, 2007), demonstrates the need for specific and detailed language in 363 sale motions. The debtor, Mach 1, Inc., sold "military motivational merchandise." It had obtained from the plaintiff, Bryant, the right to use a photo of Army Ranger snipers in its products. During the bankruptcy, it sold all of its assets to the defendant, Mach 1, LLC, through a 363 sale. The assets sold included its inventory of posters with the Bryant photo.

After the sale, Bryant sued Mach 1, LLC for copyright infringement. Among other things, Bryant claimed that Mach 1, LLC was infringing his copyright in the photo by (a) continuing to sell the existing stock of posters containing the photo and (b) using the photo on Mach 1, LLC's website.

The court looked to the 363 sale process to determine whether Mach 1, LLC was violating Bryant's copyrights. The sale order included all inventory. The bill of sale also included all intangible property. (Whether the sale agreement included intangible property is unclear.) The sale order did, however, provide that the sale was "free and clear of liens, encumbrances and claims of interest, including...claims of photographers and/or artists whose originals were reproduced in connection with the image based portion of the debtor's inventory..." The sale motion had been served on Bryant.

The Court held the buyer could resell the posters with the picture on it. In the summary judgment pleadings, Bryant had conceded that Mach 1, LLC had properly acquired the inventory and the right to resell it. The detailed language in the sale order stood the buyer in good stead.

The Court was unsure about the buyer's continued right to use the image on the website. The Court made a distinction between whether the buyer was using the image just in connection with the sale of the particular inventory of posters, or generally.

Bryant had conceded that Mach 1, LLC acquired a right of display under the Copyright Act's first sale doctrine. The Court stated that if the image was used on the website solely for the purpose of selling the poster (so people shopping on-line could see what the poster looked like), that was consistent with the buyer's rights under the first sale doctrine and, thus, okay. However, the sale order did not contain language sufficient to put Bryant on notice that the buyer would obtain the right to use the image on its website generally. Referencing ITOFCA, Inc. v. Megatrans Logistics, Inc., 322 F.3d 928 (7th Cir. 2003), the Court held that the 363 sale order was insufficient to transfer to Mach 1, LLC the right to use the image on its website generally (it was not entirely clear from the decision whether the debtor had this right in the first place.)

Bryant demonstrates that value of specific attention to detail in 363 sale motions as well as the value of providing notice of the sale to all interested parties.

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February 14, 2007
  Don't forget to sign your e-mail (at the bottom)
A recent decision by the Michigan Court of Appeals addressed the UETA's effect on e-mailed settlement negotiations. In Kloian v. Domino's Pizza, LLC, 2006 WL 3824890 (Mich. App. 2006), counsel for a personal injury plaintiff negotiated a settlement with the defendant by use of e-mails. After the attorneys agreed on the essential terms, the plaintiff refused to sign the settlement papers. The defendant moved to enforce the settlement. The Court complied. On appeal, the Circuit Court held, first, that the e-mails contained all of the essential terms of the agreement and also contained clear indications of the attorney's assent to the terms. Second, the Court held that under the UETA, the attorney's inclusion of their names on the bottom of the e-mails consituted was the equivalent of "subscribing" the agreement.

In an interesting twist, the Court noted that in Michigan, settlement agreements must be "subscribed," which is defined as placing your name at the bottom of the agreement. A claimed amendment to the agreement was, thus, ineffective because the sending attorney had put his name at the top of the e-mail, not the bottom.

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

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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.

Copyright owner snipes at bankruptcy sale
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