Jaffé v. Samsung Electronics Co.

Qimonda AG, a German corporation that made semiconductors, filed for bankruptcy in Germany. The German court appointed Michael Jaffé (plaintiff) to administer Qimonda’s assets, which included some 4,000 United States patents that were subject to cross-licensing agreements with other semiconductor manufacturers (collectively, licensees), including Samsung Electronics Company, Ltd. (defendant). Jaffé filed a petition in the United States Bankruptcy Court for the Eastern District of Virginia under Chapter 15 of the United States Bankruptcy Code (chapter 15) requesting recognition of the foreign proceeding. Jaffé also notified the licensees that, under the German insolvency code, the licenses were no longer enforceable. The bankruptcy court entered an order recognizing the German proceeding and, after an evidentiary hearing, ordered that Jaffé must afford the licensees rights under 11 U.S.C. § 365(n), which limited a bankruptcy trustee’s ability to unilaterally reject licenses to the debtor’s intellectual property by allowing the debtor’s licensees to elect to retain rights under the licenses. In so ruling, the court found that the potential harm to licensees from rejection of the licenses would slow the pace of innovation in the United States, to the detriment of the United States economy. Therefore, protection of the licensees’ interests was necessary to further the public policy underlying § 365(n). Jaffé appealed.