Jaffe v. Samsung Electronics Company, Limited

Summarized by Elizabeth Gunn , United States Bankruptcy Court, District of Columbia
12 years 2 months ago

Citation:

Jaffe v. Samsung Electronics Co., Ltd., et al., Case No. 12-1802 (4th Cir. Dec. 3, 2013)

Tag(s):

Ruling:

The bankruptcy court properly recognized that in considerting a request for discretionary relief under section 1521(a), the court must also apply the balancing test set forth in section 1522(a). The bankruptcy court reasonably exercised its discretion in balancing the interests of licensees with the interests of the debtor and finding that application of section 365(n) was necessary to sufficiently protect licensees, and therefore is affirmed.

Procedural context:

Direct appeal from the bankruptcy court for the Eastern District of Virginia recognizing German insolvency proceeding as foreign main proceeding under 11 U.S.C. section 1521(a)(5), but conditioning such relief on requirement that 11 U.S.C. section 365(n) apply to licensees of debtor.

Facts:

Qimonda AG filed an insolvency proceeding in Germany in January 2009. In April 2009, Dr. Michael Jaffe was appointed to serve as insolvency administrator to liquidate the estate. The principal assets of the estate were approximately 10,000 patents, including 4,000 U.S. patents. The U.S. patents were subject to cross-license agreements with competitors. In June 2009, Jaffe commenced a Chapter 15 proceeding for recognition of the German proceeding as a "foreign main proceeding" under section 1517. Jaffe additionally sought an order pusuant to section 1521(a)(5) entrusting him with all of Qimonda's assets located within the territorial jurisdiction of the United States, primarily the patents. The bankruptcy court granted Jaffe the requested relief. Contemporaneously with the Chapter 15 proceeding, Jaffe sent letters to Qimonda's licensees under cross-license agreements delcaring that the licenses were no longer enforceable under section 103 of the German Insolvency Code. Licensees responded that they elected to retain their rights under the license pursuant to section 365(n). In response, Jaffe sought a determination that section 365(n) was not applicable. Initially, Jaffe prevailed in the bankruptcy court. However, on appeal, the district court reversed and remanded to the bankruptcy court for consideration of the section 1522(a) balancing test and section 1506 public policy considerations. After a four day evidentiary hearing on remand, the bankruptcy court issued an order holding that section 365(n) applied with respect to the debtor's U.S. patents. The bankruptcy court found that the balancing of the debtor and creditor interests required by section 1522 weighed in favor of application of section 365(n). In addition, the bankruptcy court also concluded that under section 1506 deferring to German law, to the extent it allowed cancellation of U.S. patent licenses, would be manifestly contrary to public policy and therefore 365(n) should apply. Jaffe filed for direct appeal to the Fourth Circuit and the direct appeal was certified in June 2012.

Judge(s):

Niemeyer, Wynn, and Floyd, Circuit Judges

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