Property, intangible

a blog about ownership of intellectual property rights and its licensing

The Bankruptcy Court Still Has to Approve It

Here’s a bankruptcy practice tip—you can’t just go signing documents when your company is in bankruptcy.

Defendant Deep claimed to own the copyright in the “Aimster” software of yore. He accused plaintiff XAC, LLC, a subsidiary of Xerox, of copyright infringement. Deep had three different theories for why he owned the copyright in the software, one of which was that he was the owner by assignment. BuddyUSA was the original copyright owner (at least for purposes of this particular argument), and Deep, acting as President of BuddyUSA, assigned the copyright to himself personally in an agreement signed on March 20, 2009.

The problem was that BuddyUSA had filed for bankruptcy in March, 2002. Plaintiff XAC pointed out that the software was part of the estate and could only be assigned by the trustee, not by Deep personally. Deep responded that the written document was simply ratification of an agreement entered into before the bankruptcy and was therefore valid. The court agreed with XAC:

Clearly, under Second Circuit precedent, an oral agreement that is subsequently memorialized in writing can cure a standing defect. However, the party purporting to transfer its rights under a written agreement cannot effect such a transfer unless it has the authority to do so. Mr. Deep has not come forward with any evidence to show that, at the time that BuddyUSA signed the Master Agreement, it had the requisite authority. Certainly, there is no evidence that either the Trustee or the Bankruptcy Court approved such a transfer and without that approval, the transfer is invalid; a point that Mr. Deep does not dispute. Without evidence that BuddyUSA validly transferred its ownership of the copyright in the Protected Software to Mr. Deep, the only reasonable conclusion that the Court can draw, based on the undisputed facts in the record, is that Mr. Deep is not the owner of the copyright in the Protected Software and, therefore, he does not have standing to bring a claim for copyright infringement.

Summary judgment granted to XAC.

XAC, LLC v . Deep, No. 1:07-CV-135 (FJS/RFT) (N.D.N.Y. Oct. 10, 2011)

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