In re Spansion, Inc.

Spansion, Inc. (debtor) filed a patent-infringement complaint against Apple Inc. in November 2008. In February 2009, Spansion and Apple entered into a letter agreement in which Apple agreed to not bar Spansion as a supplier, and Spansion agreed to dismiss its complaint and promised to not file future actions related to the patents in dispute. In March 2009, Spansion filed a petition under Chapter 11 of the United States Bankruptcy Code and moved to reject the letter agreement as an executory contract. The bankruptcy court granted Spansion’s motion and issued an order stating that the agreement was rejected and that the order constituted written notice of the agreement’s termination. Apple then filed a notice of election under 11 U.S.C. § 365(n) to retain its rights under the agreement, contending that the agreement was a license. Apple also moved, pursuant to Rule 60(b) of the Federal Rules of Civil Procedure, to clarify the order, arguing that Spansion had not asked to terminate the agreement. The bankruptcy court granted Apple’s Rule 60(b) motion and amended its order to state that it was without prejudice as to the issue of whether the agreement was or could be terminated by Spansion. The court also denied Apple’s § 365(n) election, finding that § 365(n) was inapplicable because the agreement was not a license. Apple appealed the denial of its § 365(n) election, and Spansion cross-appealed as to the grant of Apple’s Rule 60(b) motion. The district court found that the agreement was a license because it was a promise to not sue and that § 365(n), therefore, allowed Apple to elect to retain its rights. The district court also ruled that the bankruptcy court had not abused its discretion in granting Apple’s Rule 60(b) motion. Spansion appealed.