CONFIDENTIALDRAFT
VIA
E M IL
MEMOR N UM
ToNationalBankruptcyConferenceExecutiveCommittee
CC
SallySchultzNeely
Alan
N
Resnick
From
InternationalAspectsCommitteeReProposedAmendmenttoSection1520
Section6(d)
of
InnovationAct,H.R.3309
Date
November12 2013
TheInnovationAct,whichis
primarily
focused
onpatentlitigationreform,
contains
an
amendment
tosection1520ofchapter15oftheBankruptcyCodethatwebelieveis
inappropriate
and
that
we
recommend
the
Conferencestrongly
oppose
in
its
present
form.
The
proposed
amendmentappears
inSEC.6,PROCEDURES
AND
PRACTICESTO
IMPLEMENT
AND
RECOMMENDATIONS
TOTHE
JUDICIAL
CONFERENCE
andprovidesasfollows:
(d)PROTECTIONOFINTELLECTUAL-PROPERTY
LICENSES
IN
BANKRUPTCY —
(1)INGENERAL.—Section1520(a)
of
title11,
United
States
Code
is
amended—
(A)inparagraph(3),bystrikingand
andinsertingasemicolon;
(B)inparagraph(4),bystrikingtheperiodattheendandinserting
and* ;
and
C)by
inserting
at
^e
endthefollowing
newparagraph:
(5)section365(n)appliestointellectualproperty
of
whichthedebtorisa
licensor
or
whichthe
debtorhas
transferred.**.
(2)
EFFECTIVE
DATE.—^The
amendmentsmade
bythis
subsection
shall
take
effectonthedate
of
theenactment
of
thisActandshallapplytoanyactionfor
whichacomplaintispendingon,orfiledonorafter,suchdate
of
enactment.
LIBC/5010733 5
Chapter15
of
theBankruptcyCode,includedinthe2005amendmentstotheCodewith
largebipartisanmajorities,isdesignedtoachieveworldwidecooperationintheliquidationor
reorganization
of
amultinationalcompanyinordertopreservevalueforcreditorsandother
stakeholders,especiallyemployees.Its
flindamental
structureis universalist inthatit
requires
thateachcountryrecognizeaforeignmainproceedinginthedebtor shomecountryastheleaderintheworldwideeffortandthatitcooperatewiththatjurisdictiontoachievethebestresultsfor
all
concerned.
Among
other
advantages,thisapproach
permits
the
sale
of
wholedivisions
with
assets
and
operations
in
severalnations
asa
single
piece,
whichalmost
alwayswill
yield
a
higher
price.Itisalsoessentialtoreorganization
of
aglobalbusiness.
Chapter
15
incorporated
the
UNCITRALModel
Law
on
Cross-BorderInsolvency
to
encourage
cooperation
between
the
UnitedStates
and
foreigncountries
with
respect
to
transnational
insolvency
cases. ^
WhiletheModel
Law
requiredmodifications
to
fit
into
the
existing
judicial
and
legislative
scheme,chapter
15
followedtheexhortation
of
UNCITRAL;
Therefore,
in
order
to
achieve
a
satisfactory
degree
of
harmonization
and
certainty,
itis
recommended
that
States
[countries]
make
as
few
changes
as
possible
in
incorporating
the
model
law
into
their
legal
systems. ^Theproposedamendment
to
section
1520
violates
thepurpose
of
chapter
15
to
furthwinternational
cooperation
and,
to
that
end,
theguidance
of
UNCITRAL
to
minimize
modifications
totheModel
Law
Adding
a
provision
to
chapter
5
thatdeals
with
a
special
situation
violates
the
principle
of
lu^formity^^
the odel
aw
a
valuable
mechanism
for
greater
legal
certaintyfor
H.R.Rep.
No.
109-31,
pt.
1,109th
Cong.,
1st
Sess.
105
2005) House
Report
or
«H.R.Rep. ).
^
UNCITRAL
ModelLawon
Cross-BorderInsolvency
with
Guide
toEnactment
adopted
on
May
30.1997(the
Model
Law,
the
Guide. ).
The
Guide
repeats
this
admonition
in^
50:
In
enacting
the
Model
Law,
itis
advisable
to
adhere
as
much
as
possible
tothe
uniformtext
in
order
to
make
the
national
law
as
transparent
as
possible
for
foreign
users
ofthe
national
law(seealso
paragraphs
11-12
and
21
above).
LIBa5 I 733 5
tradeandinvestment.Thisistrueeven
if
onebelievesthat asamatter
of
publicpolicy the
special
situationshould
always
be
decided
applyingU.S.
law.
Bysuchaunilateral non-uniform
amendment theUnitedStatesinvitesothercountriestomodifytheirversions
of
theModelLaw
inwaysthatmaybedetrimentalto
United
States
partiesinforeignproceedings.Thesituation
addressed
bytheproposed
amendment
is
already
before
the
courts
andthe
tools
to
address
the
situation
are
alreadywithinchapter
15.
The
courts
candealwiththe
issue
appropriately
and
predictablywithout
opening
the
door
to
other
countries
to
reciprocatewith
their
own
deviations
fromthe
ModelLaw
Section
1520,
Effects
of
recognition
ofaforeign
main
proceedings
provides
automatic
relief
on
recognition
ofa
foreignmain
proceeding.^
It
implements
Article
20
of
the
Model
Law
by
incorporatingsections
of
the
BankruptcyCode
that
are
consistentwith
thepurpose
of
Article
20.^
BothArticle
20
and
section
1520
operateautomaticallyuponrecognition
ofa
foreignmain
proceeding
and
impose
effects
that
are
necessarytoallowsteps
to
be
taken
to
organize
an
orderlyandfair
cross-border
insolvency
proceeding...^
Thefundamental
effectsnecessary
for
an
orderly
and
fair
cross-border
insolvency
are(a)
a
stay
of
actionsagainst
or
concerningthe
debtor
or
its
assets,
rights,
obligations
or
liabilities,including
a
stay
of
executionagainst
the
Section
1520
provides,
in
pertinent
part,
as
follows;
(a)Upon
recognition
ofa
foreign
proceeding
thatisa
foreign
main
proceeding—
(1)sections
6
and
362apply
with
respect
totiie
debtor
and
theproperty
of
the
debtorthat
is
withinthe
territorial
jurisdiction
of
theUnitedStates;
(2)sections
363,549,
and
552
apply
to
a
transfer
of
an
interest
of
the
debtor
in
propertythat
is
withinthe
territorial
jurisdiction
of
the
UnitedStates
to
thesame
extent
that
thesections
wouldapply
to
property
ofan
estate;
(3)unlessthecourtordersotherwise,
theforeign
representative
may
operate
the
debtor s
businessandmay
exercise
the
rights
and
powers
ofa
trustee
under
and
to
theextentprovided
by
sections
363
and552;
and
(4)section
552
applies
to
property
ofthe
debtor
that
is
within
the
territorial
jurisdiction
of
theUnitedStates.
H.R.Rep.
114-115(2005).
^
Guide
at^
143.
Reference
totheModel
Law
and
the
Guidefor
interpretation
of
chapter
5
areencouragedby
section1508.See»also H.R.Rep.109-110.
LIBQSOl
733 5