Page 17 - US Bankruptcy Code Overview

Licensor’s Consent Required to Assume?
Red = Yes Green = No Yellow = Unclear
Consequences of Rejection Generally
- Rejection of an executory contract is treated as breach of that contract, with damages calculated as if such claim had arisen immediately before the petition date. 11 U.S.C. § 502(g).
- Following rejection, a licensee cannot compel future performance by the licensor, but merely has a pre- petition damages claim under 11 U.S.C. § 365(g).
- Difficulty is in ability of trustee/debtor/new owner to provide current contract rights post-emergence.
In re Spansion, Inc., 2012 U.S. App. LEXIS 26131 (3d Cir. Dec. 21, 2012)
- 2008 (pre-petition): Spansion filed an ITC action for patent infringement against Apple.
- February 2009: Parties enter into letter agreement -- Spansion agrees to drop its claims against Apple and to not sue Apple again with respect to the same patents. Apple agrees not to refuse to use Spansion as a supplier and to consider Spansion for future products if certain conditions were met.
- Upon filing for bankruptcy, Spansion seeks to reject the letter agreement. Bankruptcy court approves the rejection.
- Subsequently, Apple asserts that the promise not to sue was a license under which it was the licensee and invokes its section 365(n) right to retain its right not to be sued.
- Spansion seeks to enforce its rejection order in the bankruptcy court. The bankruptcy court approves and denies Apple’s section 365(n) election.
- The district court overturns the decision on appeal
- Third Circuit affirms the district court’s reversal, holding that a license “need not be a formal grant.” Thus, the letter agreement was “a promise not to sue” sufficient to constitute a license.
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