Penick Pharmaceutical, Inc. & Unofficial Committee of Equity Holders of Penick Pharmaceutical, Inc. v. McManigle

227 B.R. 229 (1998)

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Penick Pharmaceutical, Inc. & Unofficial Committee of Equity Holders of Penick Pharmaceutical, Inc. v. McManigle

United States Bankruptcy Court for the Southern District of New York
227 B.R. 229 (1998)

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Facts

In 1994, Penick Pharmaceutical, Inc. (Penick) (plaintiff) filed for bankruptcy. The bankruptcy court appointed an equity securityholders’ committee, the Unofficial Committee of Equity Holders of Penick Pharmaceuticals, Inc. (committee) (plaintiff) to represent the rights of Penick’s shareholders. Penick researched, developed, manufactured, and sold pharmaceutical products both before and after filing. After filing for bankruptcy, several of Penick’s employees and a member of its board of directors invented a new process relating to the manufacture of opium derivatives. They performed that work subject to employment agreements requiring them to assign their inventions and associated intellectual-property rights to Penick. In 1998, Penick and the committee filed a complaint, seeking a declaration that the process belonged to Penick, not Penick’s bankruptcy estate. The bankruptcy trustee, Drew McManigle (defendant) argued that the process belonged to the bankruptcy estate as property deriving from the debtor company under the Bankruptcy Code. Penick and McManigle filed cross-motions for summary judgment.

Rule of Law

Issue

Holding and Reasoning (Lifland, J.)

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