In re 2408 W. Kennedy, LLC, 512 B.R. 708 (Bankr. M.D. Fla. 2014) –
A commercial landlord sought relief from the automatic stay so that it could complete prepetition eviction proceedings against the debtor. The debtor objected, arguing that it had a right to assume the lease. The case turned on whether the landlord effectively terminated the lease prepetition.
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
Proofs of claim filed against a debtor can be as varied as the claimants themselves. Everything from hand-written notes to hundreds of pages of sophisticated corporate documents has been submitted in support of claims. Matters become even more complicated when the claimant is a foreigner relying on foreign law and foreign language documents. In
Section 524 of the United States Bankruptcy Code (the Code) describes the effect of a discharge of a debtor, and in section 524(e), provides that a discharge of a debtor does not affect the liability of any other entity for the debtor's obligations. Today, virtually every plan of reorganization or liquidation includes releases for officers, directors and employees of the debtor, affiliates of the debtor, debtor and committee counsel involved in the case, the members of the creditors committee and plan sponsors, among others.
A California Franchise Tax Board (FTB) Chief Counsel Ruling concluded that a taxpayer’s sales of assets pursuant to a plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code were not “occasional sales” within the meaning of 18 Cal. Code Regs. § 25137(c)(1)(A)2. Instead, the sales of assets were deemed to be part of the taxpayer’s normal course of business and occurred frequently. As a result, the taxpayer’s gross receipts from the asset sales were includable in its sales factor for apportionment purposes. Under 18 Cal. Code Regs.
Some of our readers may have had the pleasure of renting a resort villa during their summer vacation (electronic postcards of such fancy digs are always welcome at the Weil Bankruptcy Blog, especially if you pose for a photo where you are reading one of our entries!). For the uninitiated (including yours truly), villas are often viewed as the ultimate upgrade for privacy and convenience when staying at a large resort for a week or more—a private home with the luxuries of a full service hotel.
In the case of United States of America v. Edward P. Bond, No. 12-4803 (2d. Cir. August 13, 2014), the United States Court of Appeals for the Second Circuit (the "Second Circuit") issued a decision that could have far-reaching effects on how liquidating chapter 11 bankruptcy cases will be handled in the future.
Lenders typically have extensive requirements for what inventory will be deemed “eligible” and included in a borrower’s borrowing base for purposes of determining how much the lender is required to lend. One of those typical requirements is that the inventory be owned by the borrower and located at a borrower location in the United States of America, where it will be subject to the Uniform Commercial Code and amenable to an Article 9 security interest.
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?