CASE NO. 13-628

IN THE

SUPR E M E C O UR T O F T H E UNI T E D ST A T ES

IN R E F O O DST A R , IN C ., DEBTOR

F O O DST A R , IN C ..

Petitioner,

v.

R A V I V O H R A .

Respondent.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE THIRTEENTH CIRCUIT

BRI E F F O R T H E PE T I T I O N E R

TEAM P57 COUNSEL FOR THE PETITIONER

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Q U EST I O NS PR ESE N T E D

1. Whether rejection of a trademark licensing agreement under 11 U.S.C. section 365 terminates ademark?

2. Whether the presumption against extraterritorial application of statutes prevents the application of 11 U.S.C. section 365 to a foreign licensing agreement.

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T A B L E O F C O N T E N TS QUESTIONS PRESENTED ............................................................................................................ i

TABLE OF CONTENTS ................................................................................................................ ii

TABLE OF AUTHORITIES ......................................................................................................... iv

OPINIONS BELOW ........................................................................................................................2

STATEMENT OF JURISDICTION.............................................................................................. ix

STATEMENT OF THE FACTS .....................................................................................................1

SUMMARY OF THE ARGUMENT ..............................................................................................3

STANDARD OF REVIEW .............................................................................................................4

ARGUMENT ...................................................................................................................................4

I. Rejection of a trademark licensing agreement under 11 U.S.C. § 365 terminates the ..........................................................4

A. Foodstar has power to reject an executory contract that is not advantageous to the estate ..............................................................................................................................5

1. The trademark licensing agreement between Foodstar and Vohra is an executory contract ..................................................................................................................6

2. estate. ....................................................................................................................7

B. Rejection of the executory rights. .............................................................................................................................8

1. The remedy under § 365(g) is money damages, absent specific exception. .........9

2. The Intellectual Property Licenses in Bankruptcy Act does not include protection for trademarks. ..................................................................................10

3. protections provided in 365(n). ...........................................................................12

a. The plain meaning of § 365(n) excludes trademarks .....................12

b. Because the language of § 365(n) is clear, it is inappropriate to resort to legislative intent. .............................................................14

c. Proposed legislation indicates that trademarks are not currently protected by § 365(n). ...................................................................16

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II. Code to foreign assets held by Foodstar. .....................................................................17

A. The property constituting Foodstthe bankruptcy court has jurisdiction over the property. .............................................18

B. intellectual property in Eastlandia. ..............................................................................20

1. The language of the Code demands extraterritorial application. .......................21

a. U.S. Bankruptcy Courts possess exclusive jurisdiction over the ........................21

b. .22

2. The overall purpose of the Code supports extraterritorial intent and application. .............................................................................................................................23

CONCLUSION ..............................................................................................................................25  

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T A B L E O F A U T H O RI T I ES

F E D E R A L C O UR T C ASES

UNI T E D ST A T ES SUPR E M E C O UR T C ASES

Consumer Prod. Safety Comm n v. GTE Sylvania, Inc., 447 U.S. 102 (1980) ..............................................................................................12 Davis v. Michigan Dep t of Treasury, 489 U.S. 803 (1989) ...............................................................................................12 EEOC v. Arabian Am. Oil Co. (Aramco), 499 U.S. 244 (1991) .........................................................................................17, 18 Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992) ...............................................................................................12 F DA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000) ..............................................................................................12 Foley Bros. v. F ilardo, 336 U.S. 281 (1949) ...............................................................................................17 Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000) ..................................................................................................12 Katchen v. Landy, 382 U.S. 323 (1966) ........................................................................................19, 23 Kelly v. Robinson,

479 U.S. 36, 43 (1986) ......................................................................................................23   Kiobel v. Royal Dutch Petroleum Co., __ U.S. __, 133 S. Ct. 1659 (2013)   .......................................................................18

l Australia Bank Ltd., 561 U.S. 247 (2010) ..............................................................................................18 NLRB v. Bildisco and Bildisco, 465 U.S. 513 (1984) .............................................................................................6, 7 Pierce v. Underwood, 487 U.S. 552 (1988) .................................................................................................4 RadLAX Gateway Hotel, LLC v. Amalgamated Bank, U.S. , 132 S.Ct. 2065 (2012) ..................................................................12

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Robinson v. Shell Oil Co., 519 U.S. 337 (1997) ...............................................................................................14 Toibb v. Radloff, 501 U.S. 157 (1991) ..............................................................................................15 Trimble v. Woodhead, 102 U.S. 647 (1880) ...........................................................................................4, 24 United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assoc., Ltd.,

484 U.S. 365 (1988) ..............................................................................................23 United States v. Ron Pair Enterprises, Inc., 489 U.S. 235 (1989) ..............................................................................................14

C IR C UI T C O UR T O F APPE A LS C ASES

Agarwal v. Pomona Valley Med. Group, Inc. (In re Pomona Valley Medical Group, Inc.), 476 F.3d 665 (9th Cir. 2007) ...............................................................................6, 7 Cheadle v. Appleatchee Ri n (In re Lovitt), 757 F.2d 1035 (9th Cir. 1985) .................................................................................5

, 700 F.2d 1279 (9th Cir. 1983) ...............................................................................19

COR Route 5 Co. v. The Penn Traffic Co. (In re Penn Traffic Co.), 524 F.3d 373 (2d Cir. 2008).....................................................................................6 Envtl. Def. Fund, Inc. v. Massey, 986 F.2d 528 (D.C. Cir. 1993) .........................................................................17, 19 F rench v. Liebmann (In re F rench), 440 F.3d 145 (4th Cir. 2006) .................................................................................19 Gloria Mfg Corp. v. I l , 734 F.2d 1020 (4th Cir. 1984) .................................................................................6 Gorenstein Enters., Inc. v. Quality Care USA, Inc., 874 F.2d 431 (7th Cir. 1989). ..................................................................................7 Hong Kong and Shanghai Banking Corp. (In re Simon), 153 F.3d 991 (9th Cir. 1998) .....................................................................19, 21, 22

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In re Kmart Corp., 359 F.3d 866 (7th Cir.2004) .................................................................................15 In re Sinclair, 870 F.2d 1340 (7th Cir. 1989) ..............................................................................15 Lomas Mortg. USA v. Wiese, 998 F.2d 764 (9th Cir.1993) ..................................................................................14 Lubrizol Enters., Inc. v. Richmond Metal F inishers, Inc., 756 F.2d 1043 (4th Cir. 1985) ....................................................................... passim Sharon Steel Corp. v. N l Fuel Gas Distrib. Corp., 872 F.2d 36 (C.A.3 (Pa.), 1989) ..............................................................................6 Stegeman v. United States, 425 F.2d 984 (9th Cir. 1970) ...........................................................................19, 20 Sunbeam Prods., Inc. v. Chicago Am. Mfg., LLC, 686 F.3d 372 (7th Cir. 2012) ...........................................................................15, 16 Underwood v. Hilliard (In re Rimsat, Ltd.), 98 F.3d 956 (7th Cir. 1996) .....................................................................................20  

B A N K RUPT C Y C O UR T C ASES

Blackstone Potato Chip Co, Inc. v. Mr. Popper, Inc. (In re Blackstone Potato Chip Co., Inc.), 109 B.R. 557 (Bankr. D.R.I. 1990) ..........................................................................8

(In re Coleman Am. Companies, Inc.), 8 B.R. 384 (Bankr. D. Kan. 1981) ...................................................................18, 19 In re Booth, 19 B.R. 53 (Bankr. D. Utah 1982) ...........................................................................4 In re Child World, Inc., 147 B.R. 847 (Bankr. S.D.N.Y. 1992) .....................................................................5 In re Chipwich, Inc., 54 B.R. 427 (Bankr. S.D.N.Y. 1985) ...................................................................7, 8

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In re Szenda, 406 B.R. 574 (Bankr. D. Mass. 2009) .....................................................................5 In re Weaver Oil Co., Inc., Slip Copy, 2008 WL 8202063 (Bankr. N.D. Fla. Nov. 17, 2008) ...........................7 Raima UK Limited v. Centura Software Corp. (In re Centura Software Corp.), 281 B.R. 660 (Bankr. E.D. Cal. 2002) .............................................4, 5, 7, 8, 13, 14 Tenucp Prop. LLC v. Riley (In re GCP CT School Acquisition, LLC), 429 B.R. 817 (B.A.P 1st Cir. 2010) .........................................................................5

C O NST I T U T I O N A L PR O V ISI O NS

U.S. Const. art. I, § 8......................................................................................................................18

ST A T U T O R Y PR O V ISI O NS

11 U.S.C.A. §101(5) (West 2012) ...................................................................................................5 11 U.S.C.A. §101(35A) (West 2012) .................................................................................... passim 11 U.S.C.A. § 365 (West 2012) ............................................................................................. passim 11 U.S.C.A. § 365(a) (West 2012) ...............................................................................2, 4, 9, 11, 15 11 U.S.C.A. § 365(g) (West 2012) ........................................................................................ passim 11 U.S.C.A. § 365(g)(1) (West 2012) ..............................................................................................5 11 U.S.C.A. § 365(g)(2) (West 2012) ..............................................................................................5 11 U.S.C.A. § 365(h)(1) (West 2012) ..............................................................................................8 11 U.S.C.A. § 365(h)(2) (West 2012) ..........................................................................................8, 9 11 U.S.C.A. § 365(j) (West 2012) ...................................................................................................9 11 U.S.C.A. § 365(i) (West 2012) ...................................................................................................9 11 U.S.C.A. § 365(n) (West 2012) ........................................................................................ passim 11 U.S.C.A. § 365(n)(1)(A) (West 2012) ......................................................................................11 11 U.S.C.A. § 365(n)(1)(B) (West 2012) ......................................................................................11

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11 U.S.C.A. § 502(g) (West 2012) ..............................................................................................5, 8 11 U.S.C.A. § 541(a) (West 2012) .......................................................................................3, 21, 22 11 U.S.C. § 1141(d)(1) (West 2012)................................................................................................5 28 U.S.C. § 1334 (West 2012) ................................................................................................19, 20, 28 U.S.C. § 1334(e) (West 2012) ............................................................................................21, 22 28 U.S.C. § 1334(e)(1) (West 2012) ........................................................................................21, 22 28 U.S.C. § 1471 (West 2012) .......................................................................................................19

L E G ISL A T I V E H IST O RI ES & C O M M I T T E E R EPO R TS

H.R. Rep. No. 82 2320, 82nd Cong., 2d Sess. (1952) .................................................................24 H.R. Rep. No. 595, 95th Cong., 1st Sess. 347 (1977) ...............................................................6, 24 Innovation Act, H.R. 3309, 113th Cong. (1st Sess. 2013) ...............................................................16 Intellectual Property Licensing in Bankruptcy Act, Pub. L. No. 100-506, 1988 U.S. Code Cong. & Admin News (102 Stat.) 2538 ...10 The United States Bankruptcy Code Pub. L. No. 95-598, 92 Stat. 2549 (1987) ..............................................................18

O T H E R A U T H O RI T I ES

Vernon Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn. L.Rev. 439, 460 (1973) ............................................................................6 David M. Jenkins, Licenses, Trademarks, and Bankruptcy, Oh My!: Trademark Licensing and the Perils of Licensor Bankruptcy, 25 J. Marshall L.Rev. 143 (1991) ..........................................................................13 Lawrence P. King et al., 3 Collier on Bankruptcy, ¶ 365.03[2] (15th ed. Rev. 2002) .......................................................................6, 13 Merriam-Webster Online Dictionary .............................................................................................22

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Restatement (Second) of the Foreign Relations Law of the United States § 38 ............................17 Stuart M. Riback, Intellectual Property Licenses: The Impact of Bankruptcy, 722 PLI/Pat 203 (2003) ..........................................................................................13 Lee Silverstein, Rejection of Executory Contracts In Bankruptcy and Reorganization, 31 U.Chi. L.Rev. 467 (1964) ...................................................................................4 Jay Westbrook, The Lessons of Maxwell Communications, 64 Fordham L.Rev. 2531 (1991)............................................................................14 Noreen M. Wiggins, The Intellectual Property Bankruptcy Protection Act: The Legislative Response to Lubrizol Enterprises, Inc. v. Richmond Metal F inishers, Inc., 16 Ru. C.T.L.J. 603 (1990) ....................................................................................14

9 Am. Jur. 2d Bankruptcy §5 (2012) ... 4, 23

ST A T E M E N T O F JURISDI C T I O N

The formal statement of jurisdiction is waived pursuant to Competition Rule VIII.

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ST A T E M E N T O F T H E F A C TS

franchisor of the popular Burger Bites fast food restaurant chain. (R. at 3). Viraj Deshmuhk

, developed the unique bite-sized burger in Eastlandia. (R. at

4).

twenty- Bites trademark in Eastlandia. (R. at

4). The contents of the Agreement, which are governed by Eastlandia law, grant Deshmukh control

over the operations of the Burger Bites restaurants, in exchange for the

trademark. (R. at 4). Deshmukh then sold his interest in the Burger Bites chain to Foodstar,

including the rights contained in the Agreement between Deshmukh and Vohra. (R. at 4). Foodstar

later expanded the Burger Bites franchise in the United States and internationally. (R. at 5).

Foodstar registered the Burger Bites trademark in the United States and in twenty-six other nations.

(R. at 4).

-sized cupcakes. (R. at 3).

Before going public, Foodstar acquired a successful miniature cupcake chain, Minicakes, to merge

and compliment their gourmet mini-burgers. (R. at 3). The combination proved to be a failure,

leaving Foodstar with a large debt and without the funds necessary to continue the Burger Bites

operation. (R. at 3). Foodstar was forced to file for chapter 11 bankruptcy. (R. at 3). Unfortunately,

Foodstar was not able to obtain financing to reorganize and is now attempting to liquidate its assets.

(R. at 3). The primary assets in mark and all of its

franchise agreements. (R. at 4).

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Opinions Below

Foodstar, as debtor-in-possession, filed a motion to reject the Agreement pursuant to 11

U.S.C. 365(a) in the United States Bankruptcy Court for the District of Moot. (R. at 5). Vohra

appeared in the bankruptcy proceeding and objected to the motion. (R. at 5). The parties stipulated

to the following pertinent facts: (1) the Agreement was an executory contract, (2) the worldwide

Burger Bites trademark would sell for ten to fifteen pe

license, and (3) Eastlandia bankruptcy law permits rejection of trademark agreements, but does not

(R. at 5). The Hon. Joel Gaffney entered an

order approving the rejection of the executory contract between Deshmukh and Vohra because

rejection would produce a higher sale price for the trademark, the primary asset in the estate. (R. at

5). Vohra timely appealed to the district court. (R. at 5).

Despite the order rejecting the Agreement, Vohra refused to stop using the trademark in

Eastlandia. (R. at 6). As a result, Foodstar filed a proceeding in bankruptcy court seeking a

nd requested an

injunction preventing Vohra from using the Burger Bites trademark. (R. at 6). The bankruptcy court

Vohra from using the trademark.

(R. at 6). Vohra appealed. (R. at 6). s and

affirmed both orders. (R. at 6).

On appeal, the Thirteenth Circuit Court of Appeals reversed, holding that rejection of a

licensing agreement in bankruptcy does not terminate the rights of the licensee, and the presumption

of extraterritorially blocks application of the rejection power to a contract that has no United States

connection. (R. at 7).

 

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SU M M A R Y O F T H E A R G U M E N T

The Court of Appeals for the Thirteenth Circuit erred in its determination that rejection of

a trademark agreement does not terminate a non-debtor s contractual rights. Foodstar exercised

its power as debtor-in-possession to reject the trademark licensing agreement between Foodstar

and Vohra upon a determination that the contract was executory in nature, and rejection of the

contract was advantageou The rejection of the executory contract

pursuant to § 365(g). The trademark licensing agreement does not fall within the limited

exceptions

o

chapter. Therefore, Vohra s right to use of the trademark terminates upon rejection of the

contract.

bankruptcy estate. Foreign assets held by American bankrupt debtors fall under the control of

the bankruptcy court because U.S. bankruptcy proceedings have world-wide in rem jurisdiction

over the property of the estate. In addition, Congress sufficiently demonstrated its intent to

extend Bankruptcy Code provisions to foreign property held by U.S. bankrupt debtors. 28

U.S.C. § 1334(e) and 11 U.S.C. § 541(a) both evince explicit congressional intent to apply the

Code to foreign assets. In addition, the overall purpose and structure of the Code support

application to all assets of the debtor, regardless of their location at home or abroad. Therefore,

this Court should reve

the Code s

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ST A ND A RD O F R E V I E W

On appeal, this Court conducts a de novo review of

Pierce v.

Underwood, 487 U.S. 552, 558 (1988).

determinations, so this Court should review the questions of law presented de novo.

A R G U M E N T

I . Re jection of a trademark licensing agreement under 11 U .S.C . § 365 terminates the

The two fundamental goals of bankruptcy are: (1) to convert the

and distribute the assets to creditors as the law provides; and, (2) give the debtor a fresh start. 9

Am. Jur. 2d Bankruptcy §5, 1 (2012). The primary objective of the trustee is to distribute the

estate equally among creditors. Trimble v. Woodhead, 102 U.S. 647, 650 (1880).

The Bankruptcy Code gives a trustee, or debtor-in-possession1, the power to

assume or reject an executory contract, subject to a court's approval. 11 U.S.C. § 365(a)

. The power of the trustee

weapon ... in the armory of estate to pay a larger dividend to

In re Booth, 19 B.R. 53, 58 (Bankr. D. Utah 1982) (quoting Lee Silverstein,

L.Rev. 467,

468 (1964)). If the trustee assumes the executory contract, performance under the contract

continues without interruption. Raima UK Limited v. Centura Software Corp. (In re Centura

Software Corp.), 281 B.R. 660, 668 (Bankr. E.D. Cal. 2002). Conversely, if the trustee rejects

the executory contract, any contractual rights will be terminated and the non-

                                                                                                               1 In this case, there is no trustee. Foodstar, as debtor-in-possession, is vested with all the powers of a trustee. 11 U.S.C. § 1107(a). For this reason, when dis -in-possession, it will be referred to as trustee.

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will be reduced to money damages. 11 U.S.C. § 502(g). The rejection of the executory contract

will place the non-debtor in the position of a general, unsecured creditor for prepetition damages.

11 U.S.C. § 365(g)(1); In re Child World, Inc., 147 B.R. 847, 852 (Bankr. S.D.N.Y. 1992).

In this case, Foodstar possessed the authority to reject the trademark licensing contract.

By exercising that authority, Foodstar terminated its contractual obligations to Vohra. The

bankruptcy court approved the rejection, and correctly acknowledged

the position of an unsecured creditor.

A . Foodstar has the power to re ject an executory contract that is not advantageous to the estate. Before the commencement of a bankruptcy case, the trustee must determine whether to

assume or reject an executory contract. In re Centura Software Corp., 281 B.R. at 668. The

ability to reject or assume an executory contract is one of the most powerful tools a trustee

wields. 11 U.S.C.A. § 365; In re Szenda, 406 B.R. 574, 579 (Bankr. D. Mass. 2009). If the

trustee assumes the contract, the rights of the contracting parties remain intact. In re Centura

Software Corp., 281 B.R. at 668. However, if the trustee determines that the executory contract

is detrimental to the estate, the trustee must reject the contract. Tenucp Prop. LLC v. Riley (In re

GCP CT School Acquisition, LLC), 429 B.R. 817, 824 (B.A.P 1st Cir. 2010). When an

executory contract is rejected, the contract is dated retroactively to the date of filing the

with all other unsecured creditors. 11 U.S.C. §§ 101(5) & 1141(d)(1); Cheadle v. Appleatchee

(In re Lovitt), 757 F.2d 1035, 1041 (9th Cir. 1985).

The bankruptcy court must honor the decision of the trustee to reject an executory

contract absent a clear showing that the decision manifestly unreasonable that it could not

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Agarwal v. Pomona Valley Medical

Group, Inc. (In re Pomona Valley Medical Group, Inc.), 476 F.3d 665, 670 (9th Cir. 2007). In

Lubrizol Enterprises, Inc. v. Richmond Metal F inishers, Inc., 756 F.2d 1043 (4th Cir. 1985), the

Fourth Circuit Court of Appeals articulated a two-part test to determine whether a bankruptcy

court should approve the rejection of a contract. Approval of the rejection is justified

when: (1) the contract is executory, and (2) the rejection of the contract is advantageous to the

Id.

1. The trademark licensing agreement between Foodstar and Vohra is an executory contract.

The C 2 COR Route 5 Co. v. The Penn

Traffic Co. (In re Penn Traffic Co.), 524 F.3d 373, 379 (2d Cir. 2008). Courts and scholars

commonly refer to a definition articulated by noted professor Vernon Countryman. See Gloria

Mfg. Corp. v. I , 734 F.2d 1020, 1022 (4th Cir. 1984),

Sharon Steel Corp. v. Na l Fuel Gas Distrib. Corp., 872 F.2d 36, 39 (C.A.3 (Pa.), 1989). An

the contract are so far unperformed that the failure of either to complete performance would

constitute a material breach excu Vernon Countryman, Executory

Contracts in Bankruptcy: Part I, 57 Minn. L.Rev. 439, 460 (1973); see also Lawrence P. King

et al., 3 Collier on Bankruptcy, ¶ 365.03[2] (15th ed. Rev. 2002). Simply, a contract is executory

if performance is due to some extent on both sides. NLRB v. Bildisco and Bildisco, 465 U.S.

513, 522 n. 6 (1984).

                                                                                                               2 Though there is no precise definition of what contracts are executory, it generally includes contracts on which

H.R.Rep. No. 595, 95th Cong., 1st Sess. 347 (1977).

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In a typical trademark licensing agreement, the licensor of a trademark maintains

Gorenstein Enters., Inc. v. Quality Care USA, Inc., 874 F.2d 431, 435 (7th Cir. 1989). In return,

the licensee has a continued duty to pay royalties to the licensor for use and enjoyment of the

trademark. In re Chipwich, Inc., 54 B.R. 427, 430 (Bankr. S.D.N.Y. 1985). Courts have found

that trademark licensing agreements are executory contracts. See id.; In re Centura Software

Co., 281 B.R. at 660.

The trademark licensing agreement between Vohra and Foodstar easily satisfies the

executory contract element of the Lubrizol test. Deshmukh granted Vohra a twenty-year

exclusive trademark license in Eastlandia. (R. at 4). Subsequently, Deshmukh assigned his

interest in the trademark license agreement to Foodstar. (R. at 4). The trademark licensing

agreement gave Vohra rights to use the Burger Bites trademark in Eastlandia in exchange for

control and quality assurance from Foodstar. (R. at 4). Further, both parties stipulated that the

trademark licensing agreement was an executory contract. (R. at 5).

2. is advantageous to the

The second element of the Lubrizol test requires the trustee to establish that rejection will

benefit the estate. Lubrizol, 756 F.2d at 1046. The trustee must produce credible evidence that

the decision to reject the executory contract was in the best interest of the estate. In re Pomona

Valley Med. Group, Inc., 476 F.3d at 670. the

decision. In re Weaver Oil Co., Inc., No. 08-40379-LMK, 2008 WL 8202063, at *2

(Bankr. N.D. Fla. Nov. 17, 2008). The Bankruptcy court should app

standard in re Bildisco & Bildisco, 465 U.S. at 523. The business

judgment rule, as applied to a decision to reject an executory contract, should be accepted by the

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court unless the decision is so manifestly unreasonable that it could not be based on sound

In re Pomona Valley Medical

Group, Inc., 476 F.3d at 670.

rejection should be reinstated because the

rejection is advantageous to the estate. The worldwide Burger Bites trademark would sell for ten

to fifteen percent less if it were , according to the stipulation of the

parties. (R. at 5). The Burger Bites tradem

(R. at 4). The Hon. Joel Gaffney entered an order finding that rejection was in the best interest

of the estate because it would produce a higher sale price for the Burger Bites trademark. (R. at

5). The District Court of Moot affirmed the bankruptcy rejection was

in the best interest of the estate. (R. at 6).

B . Re jection of the executory contract results in termination of contractual rights.

Once a trustee rejects an executory contract, and gains approval from the court, that

rejection is treated as a statutory breach of contract. 11 U.S.C. § 365(g). A claim for the breach

arises under 11 U.S.C. § 502(g), which places the non-debtor party in the position as an

unsecured creditor for purposes of recovery. Courts have interpreted 11 U.S.C. § 365(g)

to mean that the non- are terminated after rejection. See

Lubrizol, 756 F.2d at 1048; In re Centura Software Co., 281 B.R. at 673; In re Chipwich, Inc.,

54 B.R. at 431; Blackstone Potato Chip Co, Inc. v. Mr. Popper, Inc. (In re Blackstone Potato

Chip Co., Inc.), 109 B.R. 557 (Bankr. D.R.I. 1990)). Congress has determined, however, that

some types of property warrant special protection and has laid out specific exceptions under

which the contractual rights of the non-debtor are retained, rather than terminated. See 11 U.S.C.

§ 365(h)(1) (providing remedies for lessees under unexpired real estate leases), 11 U.S.C. §

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365(h)(2) (protecting owners of real property or timeshare interests), 11 U.S.C. § 365(j & i)

(excepting purchasers of real property or timeshare interests who are already in possession). In

1988, Congress amended § 365 to provide protection for certain types of

11 U.S.C. § 365(n) . In addition to money damages pursuant to § 365(g), Congress

created this exception to provide for retention of contractual rights following rejection.

1. The remedy under § 365(g) is money damages, absent a specific exception.

The Fourth Circuit Court of Appeals held that a non- are

terminated upon rejection under § 365(g). Lubrizol, 756 F.3d at 1048. In Lubrizol, the bankrupt

debtor, Richmond Metal Finishers ( RMF , asked a bankruptcy court to approve rejection of a

technology licensing agreement pursuant to 11 U.S.C. § 365(a). The agreement provided that

Lubrizol would have a non- -coating process. Id. at 1045.

Under the contract, RMF and Lubrizol exchanged promises to perform certain duties regarding

the technology licensing agreement. Id.

Before Lubrizol had used the patented RMF technology, RMF filed for bankruptcy under

chapter 11. Id. As part of the bankruptcy proceeding, RMF sought to reject the contract with

Lubrizol under 11 U.S.C. § 365(a). The bankruptcy court approved rejection of this contract. Id.

at 1044. However, upon determination that the contract was not executory and rejection was not

advantageous to the estate, the district court reversed. Id. On appeal, the Fourth Circuit

Id. at 1048.

In its decision, the Court of Appeals determined that the contract in question was

executory and rejection was in the best . Id. at 1046-48. After the

determination that the licensing agreement could be rejected, the court considered the issue of

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the remedy following rejection. Id. at 1048. Specifically, the court considered whether Lubrizol

could continue using the license after rejection of the contract. Id.

To answer this question, the court looked to both the text and the legislative history of §

365(g). history

of § 365 makes clear that the purpose of the provision is to provide only a damages remedy for

the non- Id. at 1048 (emphasis added) (citing H.Rep. No. 95-595, 95th Cong.,

2d Sess. 349, reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6305). The court concluded

that under § 365(g), Lubrizol could not retain its contractual rights and could not use the

intellectual property after rejection of the contract. Lubrizol, at 1048.

The facts of Lubrizol are substantially similar to the facts . Like the

court in Lubrizol, the United States Bankruptcy Court for the District of Moot and the District

Court for the District of Moot correctly found that an executory contract existed between the

parties and that rejection was in the best interest of the estate. (R. at 6). As the court found in

Lubrizol, this Court should acknowledge that the appropriate remedy for Vohra is money

damages because § 365(g) does not provide for the non-

Although Congress later amended § 365, the holding of Lubrizol remains applicable today to the

rejection of executory contracts involving trademarks.

2. The Intellectual Property L icenses in Bankruptcy Act does not include protections for trademarks.

Three years after the Lubrizol opinion, Congress amended 11 U.S.C. § 365 by enacting

the Intellectual Property Licenses in Bankruptcy Act. S. 1626, 100th Cong., 2d Sess. (1988)

(enacted)(codified at 11 U.S.C. §§ 365(n) & 101(35A)). This amendment provides for special

11

U.S.C. § 365(n). Under this section, a licensee

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nses when the licensing agreement is rejected under §

365(a). Id.

Id. Within the

definitional section of c means (a) trade secret, (b) invention,

process, design, or plant protected under title 35, (c) patent application, (d) plant variety, (e)

work of authorship protected under title 17, or (f) mask work protected under chapter 9 of title

17. 11 U.S.C. § 101(35A). Conspicuously missing from the enumerated types of intellectual

property offered the special protection under § 365(n) are trademarks.

The major change produced by this amendment is that the licensee can elect to proceed

under one of two courses: (1) the licensee may either treat the contract as terminated or (2) can

continue to use the Id. at § 365(n)(1)(A)-(B). If the licensee

chooses to terminate the contract, the licensee may assert a claim pursuant to § 365(g). If,

however, the licensee wishes to continue the use of the protected

licensee retains all of its right under the licensing contract as they existed before the bankruptcy

proceedings were commenced. Id. at § 365(n)(1)(B).

Congress chose not to cloak trademarks with the special protections for

hapter 11. does not qualify for the

special protections afforded by § 365(n). Absent any special protection, the remedy remains

monetary damages under § 365(g) following rejection of a trademark licensing agreement.

Despite the clear congressional limitation of special protections

defined in statute, some courts have overreached their authority.

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3. Proper statutory construction excludes from the protections provided in § 365(n).

This issue of interpreting § 365(n), as it applies to trademark licensing agreements, has

presented itself before a limited number of courts. Despite their well-intentioned efforts, some

courts have strayed far from the path of statut

he Bankruptcy Code standardizes an expansive (and sometimes unruly) area

established prin RadLAX Gateway Hotel, LLC v. Amalgamated

Bank, U.S. , 132 S.Ct. 2065, 2073 (2012). The primary rule of statutory construction is

that the plain meaning of a statute governs. Estate of Cowart v. Nicklos Drilling Co., 505 U.S.

469, 475 (1992).

the plain meaning of a statute. Id.

a. The plain meaning of § 365(n) excludes trademarks.

The starting point for interpreting a statute is the language of the statute itself. Consumer

n v. GTE Sylvania, Inc., 447 U.S. 102, 107 (1980).

meaning is plain and where the text is not absurd, the only function of the court is to apply the

statute according to its terms. Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530

U.S. 1, 6 (2000).

F DA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132-33 (2000) (quoting

Brown v. Gardner, 513 U.S. 115, 118 (1994)). It is a core canon of statutory construction that

words should be read in the context of their whole statutory scheme. Brown & Williamson

Tobacco Corp., 529 U.S. 133 (citing Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 809

(1989)).

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Looking to the wider context of the statutory scheme of chapter 11, it is necessary to

consider § 365(n) along with the definitions referred to in the chapter. definition of

trademarks. 11 U.S.C. § 101(35A). Therefore, it is

evident that trademarks do not fall under the purview of protections provided by § 365(n). After

examining the plain meaning of this statute, the Court need look no further.

The United States Bankruptcy Court for the Northern District of California correctly

applied the rules of statutory construction when determining whether the contractual rights to a

trademark were terminated following rejection. In re Centura, 281 B.R. 660. The debtor,

Centura Software Corporation, contracted with the plaintiff, Raima UK Limited, to market and

sell software products owned by Centura. Id. at 662. Subsequently Centura filed for bankruptcy,

both in England and then in the United States. Id. at 663. The bankruptcy court rejected the

trademark licensing agreement with Raima UK. Id. Raima UK, in a later action, asked the court

to considered, inter alia, whether it was entitled to retain the rights to the Centura Software

trademark pursuant to § 365(n) following rejection of the contract. Id. at 662-63.

In its analysis on this issue, the court acknowledged that when a contract is rejected, the

debtor is deemed to have breached the contract and the remedy for the non-debtor party is a

prepetition claim under § 365(g). Id. at 668 (citing Lawrence P. King et al., 3 Collier on

Bankruptcy, ¶ 365.03[2] (15th ed. Rev. 2002)). Then the court engaged in a statutory

construction analysis to determine whether the Raima UK trademark agreement was afforded

special statutory protection under § 365(n). Id. The court looked to the plain language of the

statute and concluded that trademarks were not included. Id. at 669. The court also cited

numerous scholarly writings to support this interpretation of the statute. Id.3

                                                                                                               3 (citing Stuart M. Riback, Intellectual Property Licenses: The Impact of Bankruptcy, 722 PLI/Pat 203, 211 (2003)

Lubrizol vid M. Jenkins, Licenses,

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After looking to the plain language of the statute, and upon a finding that the language

Id. at 670 (citing Lomas Mortg. USA v. Wiese, 998 F.2d 764 (9th Cir.1993)).

ecause Congress has unambiguously indicated that

trademark licenses are to be excluded from § 365(n), it does not allow the court to weigh the

equities of this case. In re Centura, 281 B.R. at 670.

Like In re Centura

license in bankruptcy under chapter 11. Like Vohra, the non-debtor in In re Centura desired to

retain its contractual rights to use of the trademark. Therefore, in both cases, interpretation of §

365(n) is necessary to determine whether use of trademarks may be retained following rejection.

Just as the court in In re Centura, this Court should begin its inquiry by first looking to the plain

language of the statute. Because the statute in question is the same considered by the court in In

re Centura, reading of the plain

language. The plain language of § 365(n) dictates that trademark agreements terminate upon

rejection.

b. Because the language of § 365(n) is clear , it is inappropriate to resort to legislative intent.

Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997) (citing United

States v. Ron Pair Enters., Inc., 489 U.S. 235, 240 (1989)).

                                                                                                               Trademarks, and Bankruptcy, Oh My!: Trademark Licensing and the Perils of Licensor Bankruptcy, 25 J. Marshall L.Rev. 143, 144 (1991) (unprotected by § 365(n) from the harsh Lubrizol treatment, rejection of trademarks extinguishes the licensee's rights to use them, giving rise to devastating consequences); Noreen M. Wiggins, The Intellectual Property Bankruptcy Protection Act: The Legislative Response to Lubrizol Enterprises, Inc. v. Richmond Metal F inishers, Inc., 16 Ru. C.T.L.J. 603, 613 (1990) (though not involving trademarks, Lubrizol has nonetheless been significantly relied upon both before and after the 1987 amendment, especially in cases dealing with rejection of technology agreements not covered by § 365(n)).

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determine the consequences of each approach to interpreting the statute and adopt the one that

results in the least mischief, but instead Its duty is to give effect to the words that Congress has

enacted. 5. However, some courts have erroneously relied on legislative history in addressing

whether trademarks fall within the protections offered by § 365(n).

In Sunbeam Products, Inc. v. Chicago American Manufacturin., LLC, 686 F.3d 372 (7th

Cir. 2012)

its products. Id. at 374. Shortly after the contract was

Id. Sunbeam

reject the agreement with CAM under § 365(a). Id. The issue on appeal to the Seventh Circuit

Court of Appeals Id. at

375.

The bankruptcy court in Sunbeam ignored the plain meaning of § 365(n) and 11 U.S.C. §

101(35A), and instead applied its own equitable remedy to the contract in question. In its

decision, the bankruptcy court pointed to the legislative history of § 365(n) and 11 U.S.C. §

101(35A) to find support for the outcome that it deemed equitable. Acknowledging this error,

the Court of Appeals described the decision as and recognized that what the

Bankruptcy Code provides, a judge cannot override by declaring that enforcement would be

inequitable Id. at 375 (citing Toibb v. Radloff, 501 U.S. 157, 162 (1991); In re Kmart Corp.,

359 F.3d 866, 871 (7th Cir.2004); In re Sinclair, 870 F.2d 1340 (7th Cir.1989)). Despite the

flawed reasoning employed by the bankruptcy court, the Court of Appeals upheld the decision

that the contractual rights to the trademark were not terminated.

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The reasoning employed by the court in Sunbeam is not convincing. Probing into

clear and unambiguous.

under the protections of § 365(n), and trademarks are not itemized within that narrow definition.

It is within powers to determine what to include within the

duty to interpret the policies that Congress has spelled out through its statutes and implement

those statutes that are clear and whose meanings are plain.

c. Proposed legislation indicates that trademarks are not currently protected by § 365(n).

Further support for the proposition that trademarks were not envisioned to be within the

protections of § 365(n) is found in recent activity by Congress.4 On October 23, 2013, the

Innovation Act was introduced in Congress. H.R. 3309, 113th Cong. (1st Sess. 2013). Section

six of this Act would amend 11 U.S.C. § 101(35A) to include trademarks within the definition of

Id. at §6(a)(4)(d)(2). This recent action by Congress is telling that

trademarks are not curr

coming within the protections of § 365(n). If Congress had intended trademarks to be protected

ld be

redundant. Although it is apparent through the recent activity of Congress that trademarks are

legislative intent of § 365 to find support for including trademarks, despite the plain the language

of the statute.

                                                                                                               4 Pursuant t all teams shall assume that [the Innovation Act of 2013] has not yet been enacted into law and thus does not directly apply to the question upon which certiorari was granted. (Fact pattern clarification number six found at http://www.stjohns.edu/academics/school/school-law/center-bankruptcy-studies/duberstein-moot-court-competition ).

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The Bankruptcy Court for the District of Moot determined that the trademark agreement

was executory and that rejection was in the best interest of the estate. This factual finding is not

dispute The legal

conclusions of the Thirteenth Circuit Court of Appeals, however, are subject to a de novo review

by this Court. The Court of A tractual rights were

not terminated through rejection, despite the plain meaning of § 365(n). Because trademarks are

not protected under § 365(n), the reasoning of Lubrizol should apply and

inated.

I I . Code to foreign assets held by Foodstar .

Congress undoubtedly possesses the authority to govern activity beyond the territorial

boundaries of the United States. E .E .O .C . v. Arabian Am. Oil Co., 499 U.S. 244, 248, 111 S. Ct.

assumed that Congress intends statutes to apply only within U.S. borders. Foley Bros. v.

F ilardo, 336 U.S. 281, 285, 69 S. Ct. 575, 577 (1949) (citations omitted). This is known as the

Id. Although there have been several judicially

acknowledged exceptions to the presumption against extraterritoriality, only two such exceptions

are relevant to the case at hand.

First, the presumption does not apply when the matter actually regulated by the

government occurs within the legal jurisdiction of the United States. Envtl. Def. Fund, Inc. v.

Massey, 986 F.2d 528, 531-32 (D.C. Cir. 1993) (citing Restatement (Second) of the Foreign

Relations Law of the United States

tion to the

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presumption against extraterritoriality. Rather, it is more of an admonition to carefully examine

each situation to determine if the issue of extraterritoriality even arises.

Second, the presumption against extraterritoriality is overcome wh

U.S. borders. Aramco, 499 U.S. at 248, 111 S. Ct. at 1230 (1991) (citations omitted) (internal

quotations omitted). When there is sufficient evidence of congressional intent in the context and

statute, the presumption against extraterritoriality is rebutted.

Despite recent cases tightening the presumption against extraterritorial application for

certain types of legislation5, this Court has not yet addressed its applicability to the extensive

procedures and protections of the Bankruptcy Code. Examination of the relevant Code

provisions in light of existing lower court precedent necessitates the reasonable application of

Code protections to

A . because the bankruptcy court has jurisdiction over the property.

Under Article I, Section 8, of the United States Constitution, Congress is authorized to

enact "uniform Laws on the subject of Bankruptcies." Congress exercised that authority in

passing the modern version of the Bankruptcy Code in 1978. Pub. L. No. 95-598, 92 Stat. 2549.

Under this Code, the United States bankruptcy courts were established as corollaries to the

                                                                                                               5 decisions in , 561 U.S. 247 (2010), and Kiobel v. Royal Dutch Petroleum Co., __ U.S. __, 133 S. Ct. 1659 (2013) to explain why it refusHowever, the opinion below failed to consider the manner in which the Bankruptcy Code differs from the Securities Exchange Act in Morrison, and the Alien Tort Statute in Kiobel. Application of the Securities Exchange Act or the Alien Tort Statute abroad would necessarily regulate conduct. Application of the Bankruptcy Code outside the U.S. would chiefly relate to ownership of property, while it would only indirectly regulate conduct related to property. Thus, the consequences of extraterritorial application of the Bankruptcy Code would differ significantly from those likely in the situations already addressed by this Court.

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property, regardless of its location. 28 U.S.C. § 1334. See, e.g. Coleman Am. Co. v. Littleton

(In re Coleman Am. Companies, Inc.), 8 B.R. 384, 387 (Bankr. D. Kan. 1981).

Ordinarily, the presumption against extraterritoriality does not apply to activities that are

properly governed by U.S. statute. In re F rench, 440 F.3d 145, 149 (4th Cir. 2006). Minor

contact with another country will not suffice to render conduct extraterritorial. Id.; see also

Massey, 986 F.2d at 531 32; Jay Westbrook, The Lessons of Maxwell Communications, 64

Fordham L. Rev. 2531, 2538 (1996). For example, activities that take place within the territorial

borders of the U.S. are universally considered proper jurisdiction for the application of U.S.

statutes. Proceedings in bankruptcy court are no exception.

hich the

bankruptcy case is commenced obtains exclusive in rem jurisdiction over all of the property in

In re Simon, 153 F.3d 991, 996 (citing 28 U.S.C. § 1334(e); Commodity Futures

Trading Comm'n v. Co Petro Mktg. Group, Inc., 700 F.2d 1279, 1282 (9th Cir.1983)

(interpreting 28 U.S.C. § 1471, the statutory precursor to 28 U.S.C. § 1334(e))). In In re Simon,

or's property, via its exercise of in rem jurisdiction,

essentially creates a [legal] fiction that the property regardless of actual location is legally

See also

Katchen v. Landy, 382 U.S. 323, 327 (1966) (commenting that bankruptcy courts have

Commodity Futures Trading,

debtor,

wherever located, is in custodia legis

outside the geographical boundaries of the United States. See Stegeman v. United States, 425

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20  

F.2d 984, 986 (9th Cir. 1970) (construing extraterritorial jurisdictional reach of prior Bankruptcy

Act); see also Underwood v. Hilliard (In re Rimsat, Ltd.), 98 F.3d 956, 961 (7th Cir.1996).

Thus, a court need not even address the presumption against extraterritoriality when the property

outside the physical jurisdiction of the bankruptcy proceeding nevertheless falls under the legal

In the case at hand, no presumption against extraterritoriality applies. Foodstar initiated a

bankruptcy proceeding in the U.S. Bankruptcy Court in its home state of Moot. (R. at 3). The

ourt

wields jurisdiction via the operation of 28 U.S.C. § 1334. The property of the estate is, in a legal

in rem jurisdiction. For this

reason, the Eastlandia trademark falls entirely within the jurisdiction of the United States

Bankruptcy Court for the District of Moot. Even though the property in question exists outside

the physical jurisdiction of Moot, the trademark right falls squarely within the protected

There is no basis for the conclusion that a bankruptcy estate could

somehow exceed the territorial jurisdiction of the U.S. Bankruptcy Code.

B . intellectual property in Eastlandia.

Even if the Court determines that this case does present an extraterritorial issue, the Code

contains sufficient intent to rebut the presumption. Congress demonstrated its intent to apply the

gh affirmative statements within the

statutes and through the implications of the statutory scheme as a whole.

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1. The language of the Code demands extrater ritorial application.

The 1978 enactment of the Bankruptcy Code included multiple provisions demonstrating

-

Those provisions include 28 U.S.C. § 1334(e)(1) and 11 U.S.C. § 541(a).

a. U .S. Bankruptcy Courts possess exclusive jurisdiction over the assets of the bankru

-- (1) of all the property, wherever located, of

the debtor as of the commencement of such case,

added). Standard statutory construction rules apply to the interpretation of the Code. In re

Simon, 153 F.3d at 995. The plain meaning of the statute must demonstrate congressional intent

in order to overcome the presumption against extraterritoriality. Id.

thout particular regard to its being located in one place as opposed to

another. First, it is necessary to examine the individual meaning of each term in the contested

meaning

intended by Congress when it married the two words for a discrete purpose within the Code.

as most frequently property

area obviously covered by the statute.

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-

-Webster Online

Dictionary, http://www.merriam-webster.com/dictionary/wherever (last visited Jan. 27th, 2014).

In describing the property over which the U.S. bankruptcy laws have jurisdiction,

evidence that Congress fully intended to govern debtor property regardless of its physical

location outside the U.S. borders. Thus, proper statutory construction relies on the plain meaning

of the statutory language to illustrate that Congress did indeed intend for the Code to be given

extraterritorial effect when required by the nature of the assets in the

Under 11 U.S.C. § 541(a), a bankruptcy proceeding in the United States permits (or

rather, obligates) the bankruptcy trustee to exercise its authority to maximize the value of the

Id.

itute a clear

expression of extraterritorial intent by Congress. In re Simon, 153 F.3d at 996.

ssess property within

and without the territorial borders of the United States. Further, the fact that Congress

specifically noted that property constitutes part of the bankruptcy estate, regardless of its

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location, evinces a clear intent to apply the Cod

property beyond the territory of the United States.

In spite of this decisive argument in favor of extraterritorial application of Code

t to apply the Code in

dispose of the issue by proposing to limit each provision of the code to the jurisdiction

specifically outlined by that particular section. Under this theory, the Court of Appeals

haphazardly concluded that because the rejection section lacked a clear extraterritorial

However, the Court of Appeals inappropriately construed the Code in isolation, rather than as an

integrated system of law.

2. The overall purpose of the Code supports extrater ritorial intent and application.

United Sav.

Ass'n of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 371 (1988). Analysis of

congressional intent must be guided by the provisions of the law or act as a whole. Kelly v.

Robinson, 479 U.S. 36, 43 (1986) (citations omitted). The purpose behind the individual

provision, while perhaps unclear in isolation, comes into full view only within the context of the

law from which the provision springs.

Historically, a chief purpose of bankruptcy law has been to secure prompt and effective

administration and settlement of all debts and claims against the debtor, while providing an

Katchen, 382 U.S. at 328. This purpose can

be divined by examining the Code as a whole. The Code protects debtors from bearing

burdensome, lifelong debt as the result of a failed venture. Am. Jur. 2d Bankruptcy § 5, 1

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24  

(2012).

rights of both, while preventing other similarly-situated creditors from obtaining more than they

are equitably entitled to. Trimble, 102 U.S. at 650. The historic understanding of the Code has

been that, absent a concurrent, parallel bankruptcy proceeding in another country with greater

ons are sufficient to capture property of

the estate located beyond U.S. borders. See In re F rench, 303 B.R. 774, 781-83 (Bankr. D. Md.

2003) , 320 B.R. 78 (D. Md. 2004) , 440 F.3d 145 (4th Cir. 2006).

The evolution of the Code also supports the conclusion that Congress intended it to

funnel all property of the debtor into the estate, regardless of where it is located. For instance,

amendment. Congress

bankruptcy is vested with the title of the [debtor] in property which is located without, as well as

2320, 82nd Cong., 2d Sess. (1952). Thus, the

foreign and domestic property in the concept.

ith

in rem

extraterritoriality is never invoked. In the alternative, th

history demonstrate sufficient extraterritorial intent to rebut the presumption. Therefore,

Foodstar must be allowed to exercise its rejection power and retain the Burger Bites trademark

value for the estate, in satisfaction of its duty to maximize the value of the assets available for

creditors.

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Conclusion

The United States Court of Appeals for the Thirteenth Circuit should be reversed on both

issues. Debtor-in-possession Foodstar has lawfully exercised its power to reject the executory

contract with Vohra. bject to U.S.

Bankruptcy Code in spite of its location beyond U.S. borders. With this case, the Court has the

ability to improve business confidence in the Code, and assuage the fears of creditors who

depend on an efficient and consistent system.

Dated this 27th day of January, 2014.

Respectfully submitted, Attorneys for Petitioner