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?
Bankruptcy Remote? Maybe Not
In a major victory for secured creditors, the United States Bankruptcy Court for the Western District of Tennessee has held that a sale of secured property must afford a secured creditor the right to credit bid for its collateral under section 363(k) of title 11 of the United States Code (Bankruptcy Code), except in extraordinary circumstances upon a showing of “cause.” The court held that even where secured party credit bidding might impact the competitive bidding process – including potentially “chilling” third party bids – this alone does not constitute sufficient cause to deny a credito
The United States Court of Appeals for the First Circuit contributed to a circuit split regarding jurisdiction in its recent decision in Pinpoint IT Services, LLC v. Rivera (In re Atlas IT Export Corp.).
Who Will Think of the Tenants: Split in Authority Regarding the Interplay Between Bankruptcy Code Sections 363(f) and 365(h)(1)(A)
The difference between a contested matter and an adversary proceeding is relatively simple – a contested matter involves a contested request for relief in the context of the main bankruptcy proceeding (pursuant to Rule 9014 of the Federal Rules of Bankruptcy Procedure), while an adversary proceeding involves the filing of a complaint, commencing a separate proceeding governed by
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