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Vol 12, Num 3 l September 2015

Bankruptcy Litigation

► In This Issue:

A Letter from Your Newsletter Editor

Ferve E. Ozturk
Committee Newsletter Editor

The ABI Bankruptcy Litigation Committee is pleased to offer this themed newsletter issue focusing on IP matters in bankruptcy litigation.  The articles included in this issue discuss recent caselaw about royalty payments under section 365(n) of the Bankruptcy Code; the treatment of trademark licenses in free-and-clear asset sales; and the treatment of license agreements as an executory contract.  We hope these articles will be helpful to your practice.  In addition, the authors will be speaking on a Committee-wide conference call later in the fall to discuss their insights on the topics covered in the newsletter.  Please watch your inboxes for a Committee-wide email with details!


The Impact of Crumbs on Trademark Licenses in Bankruptcy

Beverly A. Berneman
Golan & Christie LLP

This article addresses how the decision in In re Crumbs Bake Shop Inc. continues the evolution of trademark licensing in bankruptcy and contributes to an understanding of the fate of Intellectual Property (IP) during a § 363 asset sale.

In bankruptcy, IP assets can be hypothecated in ways that tangible assets cannot. Likewise, IP can be licensed, in whole or in part, exclusively and nonexclusively, worldwide or by territory, with or without license fees or royalties. Thus, when dealing with IP assets in a bankruptcy, all facets of the IP should be taken into account.
» Read More

Having Your (Cup)Cake and Eating It, Too: Integrated Agreements as Executory Contracts in Light of In re Interstate Bakeries Corporation


Bill D. Bensinger
Christian & Small, LLP
Birmingham, Ala.


Nicholas J. Zluticky
Stinson Leonard Street LLP
Kansas City, Mo.

Whether a contract is executory and therefore subject to assumption or rejection can have profound consequences on both the debtor and nondebtor parties to such contract. If both parties have material obligations to the other, then a contract is executory. If no material obligations remain, the contract is not executory. If a contract is not executory, there may still be obligations to the other parties, but a party’s failure to perform such obligations will result in damages and not termination of the contract.

This straightforward analysis, however, is complicated when a potentially executory contract is integrated with a potentially nonexecutory contract. Such was the case in In re Interstate Bakeries Corp. In Interstate Bakeries, the Eighth Circuit considered whether a sale agreement and a license agreement were integrated contracts, and if so, whether the integrated contracts were executory. The court ultimately determined that the contracts were integrated but not executor, and its reasoning is instructive.

Summary of Decision

In Interstate Bakeries, the debtor entered into an asset-purchase agreement with Lewis Brothers Bakeries (LBB) in 1996, pursuant to which the debtor sold certain operations and assets to LBB (APA). As part of that agreement, the debtor agreed to permit LBB to use certain trademarks in limited territories in conjunction with LBB’s use of the purchased operations.
» Read More

Section 365(a) Trumped by Inability to Assign Trademark Under Nonbankruptcy Law


Sonette Magnus
U.S. Bankruptcy Court
(E.D. Mo.)
St. Louis

Trump Entertainment Resorts Trump AC Casino Marks, LLC (the “licensee/debtor”) filed voluntary petitions for chapter 11 relief on Sept. 9, 2014. On Aug. 5, 2014, Trump Marks, LLC sought to terminate the royalty-free trademark license previously granted to the licensee/debtor. This trademark license provided for the use of Trump Marks’s names, likenesses and other enumerated marks in connection with the operation of three Atlantic City hotel casinos in a six-state territory, subject to the parties’ enumerated termination rights. In a state court complaint, Trump Marks alleged that the licensee/debtor “failed a Quality Assurance Review and failed to cure any deficiencies, as well as other breaches of the Trademark License Agreement.”
» Read More

Who Gets Paid? Section 365(n) Royalty Payments Under “Zombie Licenses” After a Sale of IP

Christopher G. Bradley
Taube Summers
Austin, Texas

In today’s corporate bankruptcy world, a debtor’s most important and valuable assets often come in the form of intellectual property (IP). Understanding the effect of bankruptcy on IP licenses is crucial not only for debtors, but also for existing licensees and for potential purchasers of IP assets.

Section 365(n) of the Bankruptcy Code provides special rules for IP licenses where the debtor is licensor — rules that depart from the familiar bankruptcy treatment of executory contracts. This article gives a brief overview of § 365(n), then provides a short analysis of a difficult but important question: When a licensee of a debtor’s IP opts to retain its rights under § 365(n), who receives the stream of licensing payments in the event that the IP is sold: the buyer of the IP, or the debtor?
 » Read More

NEWSnazzy New Website Available for the 27th Annual Winter Leadership Conference

ABI has launched a new website and registration page for this year’s Winter Leadership Conference! Join us Dec. 3-5, 2015, at the historic Arizona Biltmore in downtown Phoenix for CLE, networking and breath-taking views. Offering up to 12/14 hours of CLE/CPE credit and 2.75/3 hours of ethics, there are a variety of sessions with topnotch speakers for consumer and business practitioners, as well as financial advisors.

Included in this year’s schedule is the Bankruptcy Litigation and Labor & Employment committees’ joint session titled Distress & Labor in the Courtroom: Pensions and CBA Rejections. Scheduled for Friday, from 3:45 – 5:00 pm, speakers for this session include Frank Anderson (Pension Benefit Guaranty Corporation; Washington, D.C.), John C. Goodchild (Morgan Lewis & Bockius LLP; Philadelphia), Jordan A. Kroop (Perkins Coie LLP; Phoenix), and Kenneth Pasquale (Stroock & Stroock & Lavan LLP; New York).

NEW Highlights from the conference include:

  • Optional events, including a golf tournament, kayaking, tennis, horseback riding and much more
  • Great Debates on chapter 11 plans, whether a bankruptcy judge can disband a creditors’ committee and must a creditor file a proof of claim
  • BAPCPA Consumer Issues: 10-Year Anniversary Special
  • Nine joint committee sessions, provided by ABI’s 18 committees
  • A live Bloomberg “Eye on Bankruptcy” luncheon presentation
  • A special Casino Night!
  • A judges’ roundtable on hot-button issues
Early-bird registration ends Oct. 2, so be sure to register to take advantage of the savings.

41st Annual Lawrence P. King & Charles Seligson Workshop on Bankruptcy & Business Reorganization


20th Views from the Bench - Georgetown Law Center 10/09/15

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