In an unusual case, the Delaware Chancery Court just recently interpreted
the federal Bankruptcy Code to determine that it has subject-matter
jurisdiction over a disagreement concerning intellectual propertycopyright rights
abandoned by a debtor in bankruptcy in Spiro v. Vions
Technology, No. 8287-VCP (Del. Ch.
March 23, 2014). Chancery Court Vice Chancellor Donald F. Parsons Jr. ruled that
under Area 554 of the Bankruptcy Code, the interests of
bankruptcy debtor Ionsep Corp. in certain important intellectual
home had been deserted to Ionsep lender Alan Spiro. Hence,.
Spiro might bring fit against Vions Technology Inc. for the.
alleged deceptive conveyance and conversion of the IP and.
misappropriation of trade keys.
By discovering that the trustee of the Ionsep estate had actually made a.
valid desertion of the IP to Spiro, Parsons even more found that.
the Chancery Court had subject-matter jurisdiction over the dispute.
and the automatic stay of the Bankruptcy Code was not.
The dispute developed out of technologies developed by Daniel.
Vaughan, a retired DuPont scientist. Vaughan founded Ionsep and.
established important innovations and patents connecting to chemical.
procedures for elements such as chromium hypophosphite and.
manganese hypophosphite. Parsons did not rule on the definitive.
scope of the IP belonging to Ionsep, however he did hold that the IP.
included (at a minimum) patents and other IP transferred to.
Ionsep by means of a licensing arrangement.
On Jan. 20, 2010, after Vaughan # 39; s death, creditors,.
including Spiro, effectively put Ionsep into a spontaneous.
Chapter 7 bankruptcy.
Spiro alleged that, prior to his death, Vaughan caused the IP to.
be moved to Vions, an entity that Spiro dealt was.
controlled by householdmember of the family of Vaughan.
All the directors and officers of Ionsep were family members of.
Vaughan. Spiro, who became an investor in 2008, was the just.
nonfamily member who was a shareholder. Spiro also lent more than.
$1.5 million to Ionsep in between 1991 and 2008. Throughout the.
bankruptcy, Spiro likewise took task of approximately $300,000 in.
protected financial obligation from another creditor.
In February 2012, the trustee, with bankruptcy court approval,.
purportedly deserted all staying possessions of the estate to Spiro.
The trustee reasoned that Spiro # 39; s lien in the assets of approximately.
$300,000 surpassed the value of the assets, which implied that the.
assets had no value to the estate. The trustee then filed a final.
report in the case in November 2013.
In March 2013, Spiro filed suit against Vions, alleging a.
fraudulent conveyance, conversion and misappropriation of trade.
secrets. Spiro sought a return of the IP rights at problem, an.
injunction versus additional personality of the IP and recovery of.
profits made and funds raised in connection with the IP.
On Oct. 28, 2005, Vaughan purported to assign all of his rights.
in his present and future patents to Vions. The specified.
consideration was $1 per patent. Regardless of confusing truths.
relating to ownership and transfers of the patents, Parsons found.
that through a licensing agreement that predated any transfer of.
the IP to Vions, Vaughan had actually offered to Ionsep important rights in.
the IP, including technical details, knowledge and improvements.
In addition, the license was exclusive and provided Ionsep the right to.
sublicense the technology.
Vions looked for to have the case dismissed for lack of.
subject-matter jurisdiction under Federal Rule of Civil Procedure.
12(b)(1), or stayed pursuant to the automatic stay of Area 362.
of the Bankruptcy Code.
Vions said that the IP stayed building of the Ionsep.
bankruptcy estate because it was not validly abandoned. Vions.
reasoned that because the IP was not noted in the schedules of.
assets of Ionsep in the bankruptcy, it might not then consequently.
be deserted. Vions also said that the IP was not appropriately.
abandoned under Area 554 of the Bankruptcy Code due to the fact that of a.
lack of notification to creditors. Therefore, Vions reasoned, Spiro as a simple.
creditor did not have standing to bring a direct suit against Vions.
and the case must be dismissed.
Vions likewise asserted that the case was remained by the.
automatic stay which the question of whether Ionsep ever owned.
the IP was a limit issue to be determined by the bankruptcy.
court, which, according to Vions, had unique jurisdiction.
Vions also said that the desertion notice was not specific.
enough to accomplish a legitimate desertion.
Parsons discovered that the trustee had the capability under Area.
554(a) of the Bankruptcy Code to desert any property of the estate.
determined to have inconsequential value to the estate. Such notice.
would be efficient under the statute so long as sufficient notification.
was offeredprovided creditors. Parsons held that the notification right here was.
appropriate because it specified that the trustee was deserting.
the estate # 39; s interest in all possessions not formerly.
abandoned and particularly determined all executory.
agreements. In addition, the trustee had actually previously filed.
a number of motions to extend time to assume or reject executory.
agreements in which he mentioned that the estate # 39; s ability to utilize.
the IP was its only important possession. Thus, the language in the.
notice in addition to the movements to extend offered creditors sufficient.
notification of the nature and scope of the property that the trustee was.
abandoning to Spiro.
The court also turned down Vions # 39; argument that the ongoing.
dispute about exactly what IP rights Ionsep held, if any, precluded the.
abandonment, which exclusive jurisdiction on that concern sat with.
the bankruptcy court. Parsons rejected that argument, finding that.
the trustee of the Ionsep estate deserted to Spiro all.
Ionsep # 39; s interests in the IP, whatever the contours of those.
interests might be. Appropriately, the judge discovered that due to the fact that there.
was no estate home at issue, the automatic stay was not.
Previously released in the Delaware Company Court.
Michael R. Lastowski is a member of Duane Morris and the.
head of its Wilmington office. Certified to practice in Delaware,.
Pennsylvania and New york city, he mainly represents Chapter 11.
Debtors. Christopher M. Winter season, a partner with the firm, is a.
Delaware company attorney who concentrates his practice on Chapter 11.
bankruptcy law and procedures, industrial and corporate finance.
and deals, and Delaware corporate and alternative entity.
Disclaimer: This Alert has been.
prepared and released for informational functions only and is not.
provided, nor should be interpreted, as legal suggestions. For more.
information, kindly see the company # 39; s.