On October 17, 2014, the Delaware Supreme Court held that under the Delaware Uniform Commercial Code, the subjective intent of a secured party is irrelevant in determining the effectiveness of a UCC-3 termination statement if the secured party authorized its filing.[1]
Background
On Monday, November 17, 2014, the United States Supreme Court agreed to decide a critical issue for mortgage lenders and secondary market investors, whether Section 506(d) of the Bankruptcy Code allows a Chapter 7 debtor to “strip off” a junior mortgage lien when the outstanding senior debt exceeds the current value of the senior lien. Bank of America, N.A. v. Caulkett, No. 13-1421, 2014 WL 2207208 (U.S. Nov. 17, 2014); Bank of America, N.A. v. Toledo-Cardona, No. 14-163, 2014 WL 3965212 (U.S. Nov. 17, 2014).
Recently, in the case of In re Trump Entertainment Resorts, Bankruptcy No. 14-12103 (Bankr. D. Del. 2014), 2014 Bankr. LEXIS 4439 (Bankr. D. Del. October 20, 2014), the U.S. Bankruptcy Court for the District of Delaware addressed the issue of whether a debtor has the authority to reject an expired collective bargaining agreement pursuant to Section 1113 of the Bankruptcy Code.
For years, it has been the rule in the Ninth Circuit that a chapter 11 plan cannot discharge or otherwise affect the obligation of a non-debtor owed to a third party. This view interprets section 524(e) of the Bankruptcy Code, which provides that “the discharge of a debt of the debtor does not affect the liability of any other third entity on, or the property of any other entity for such debt,” to specifically prohibit the permanent release, discharge, or injunction of non-debtors. See
The Bankruptcy Code definition of “intellectual property” does not explicitly include “trademarks.”1 This has led to trademark licensees losing their rights to use the trademark upon rejection of the license in bankruptcy.
"Free and Clear" Sale of a Trademark or Intellectual Property License Under Section 363 Does Not Trump Rights of Third Party Licensees under Section 365
HIGHLIGHTS:
Recent case law reminds practitioners and lenders to pay careful attention when drafting prepayment premium provisions in debt instruments or risk having the premiums disallowed in a borrower’s bankruptcy case.
On October 31, 2014, Bankruptcy Judge Kaplan of the District of New Jersey addressed two issues critically important to intellectual property licensees and purchasers: (i) can a trademark licensee use section 365(n) of the Bankruptcy Code to keep licensed marks following a debtor-licensor’s rejection of a license agreement?; and (ii) can a “free and clear” sale of intellectual property eliminate any rights retained by a licensee? In re Crumbs Bake Shop, Inc., et al., 2014 WL 5508177 (Bankr. D.N.J. Oct. 31, 2014).