Intellectual property (“IP”) can act as collateral to be pledged to secure an extension of credit.  For example, a company that borrows money from a bank can pledge its patents as collateral for the loan.  The bank (referred to as the “secured creditor”) in this case will of course want to make sure that its security interest in the IP can be enforced against the borrower if the borrower defaults on the loan.

What Happens to Your Security Interest in a Debtor’s Intellectual Property in Bankruptcy?

Bankruptcy Remote? Maybe Not

The intersection of bankruptcy law and intellectual property law is not a very nice neighborhood. Anyone dealing with intellectual property license agreements must think about how these agreements are affected if one party to the agreement becomes insolvent. Below are strategies to help parties draft license agreements that will pass through this intersection relatively safely.

Bankruptcy Concepts

Energy industry bankruptcies of all types are expected to increase, offering an opportunity for companies to acquire assets for their operating portfolios while taking advantage of the bankruptcy process. We have received numerous inquiries about how the bankruptcy process can be used to acquire assets. This Insight provides answers to frequently asked questions about what is known as the 363 or "stalking horse" bankruptcy auction process.

WHAT IS THE OPPORTUNITY?

A recent bankruptcy auction of a Texas powerplant by Optim Energy LLC provided an important lesson for potential bidders at bankruptcy auctions and their representatives on the importance of developing a clear bidding strategy in advance of the auction, and making sure the representative understands both the bidding strategy and the scope of his or her authority at the auction sale.

In 1932, J. Howard Marshall and William O.

Nonrecourse financing is common in today's commercial real estate lending market. So too are the use of special purpose entities ("SPEs") and limited guaranties from SPE members of all or a portion of the debt, the latter of which may be triggered by the voluntary bankruptcy case of, or the consent to the entry of an order for relief in an involuntary bankruptcy case filed against, the SPE borrower.

Dishi & Sons v. Bay Condos LLC, 510 B.R. 696 (S.D.N.Y. 2014) –

In approving the sale of a Chapter 11 debtor’s assets, a bankruptcy court found that a tenant of the debtor was entitled to continue in possession of the leased portion of the sold property for the remainder of its lease.  The successful bidder at the sale appealed, arguing that the sale was “free and clear” of the tenant’s interests. 

Ormet, a Delaware corporation, recently went bankrupt and shuttered its facilities in Ohio and Louisiana. As part of the bankruptcy proceedings, Ormet agreed to sell its Ohio plant for $25 million. The Steelworkers Pension Trust, the union representing Ormet’s employees, tried to delay the closing on the theory that the deal approved by the judge improperly extinguished the Trust’s $5.5 million pension claim and that the Section 363 sale violated the Employee Retirement Income Security Act or the Multiemployer Pension Plan Amendments Act. The Trust lost.

House bill H.R. 2533 was introduced three years ago with much fanfare by the then Chairman of the  House Judiciary Committee. H.R. 2533 proposes amending “title 28 of the United States Code with  respect to proper venue for cases filed by corporations under chapter 11 of title 11 of such Code.” It is  intended to reduce the number of jurisdictions available for filing a bankruptcy case by effectively  eliminating a debtor’s “place of incorporation” as a venue option.