Supreme Court of the United States

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1 Docket No In The Supreme Court of the United States October Term, 2014 IN RE FOODSTAR, INC., Debtor FOODSTAR, INC., Petitioner v. Ravi Vohra Respondent On Writ of Certiorari to the United States Court of Appeals for the Thirteenth Circuit Brief For Petitioner Team P 31 Counsel for Petitioner

2 Questions Presented I. Whether rejection of a trademark licensing agreement under 11 U.S.C. section 365 terminates the licensee s right to continue to use the trademark. II. Whether the presumption against extraterritorial application of statutes prevents the application of 11 U.S.C. section 365 to a foreign licensing agreement. i

3 Table of Contents Questions Presented i Table of Authorities..iv Opinions Below....vii Statement of Jurisdiction....vii Statement of Constitutional and Statutory Provisions.....vii Statement of Facts.. 1 Summary of the Argument...3 Arguments and Authorities..7 I. THE COURT OF APPELAS FOR THE THIRTEENTH CIRCUIT WAS INCORRECT IN HOLDING THAT REJECTION OF A TRADEMARK LICENSING AGREEMENT UNDER 11 U.S.C. 365 DOES NOT TERMINATE THE LICENSEE S RIGHT TO CONTINUE TO USE THE TRADEMARK....7 A. Rejection of an executory contract under 11 U.S.C. 365 is not only a breach, it causes a licensee to lose its rights to a trademark as well so as to give the bankruptcy estate the broadest possible relief....7 B. Foodstar s rejection of the trademark licensing agreement terminates Vohra s rights to use the Burger Bites trademark because trademarks are not protected under 11 U.S.C. 365(n)(1)..9 C. Based on the plain language of 11 U.S.C. 365(n)(1), Congressional intent should not be considered when determining whether a licensee of a trademark retains any rights when the trademark license agreement has been rejected D. Public policy supports rejection causing a licensee under a trademark licensing agreement to lose its rights in the trademark. 13 II. THE BANKRUPTCY CODE PROVIDES FOR EXTRATERRITORIAL APPLICATION OF 11 U.S.C A. Section 541 s Wherever Located by Whomever Held language applies to B. The Bankruptcy Code requires unique consideration in the application of the presumption against extraterritoriality ii

4 C. The 365 rejection power is a substantial power that would adversely affect a debtor s ability to reorganize in the United States without extraterritorial application.. 22 Conclusion Appendix A: Selected Sections from Title 11 of the U.S. Code....A Appendix B: Selected Sections from Title 15 of the U.S. Code....B Appendix C: Selected Sections from Title 28 of the U.S. Code....C iii

5 Table of Authorities Statutes and Rules 11 U.S.C. 101(35A) (2006) , 9, 10, 11, 12, 24, A 11 U.S.C. 365 (2006) , 17, 18, 19, 21-24, A 11 U.S.C. 541 (2006)..5, 6, 15-19, 21, 23, 24, A 15 U.S.C. 78j (1976) 6, B 15 U.S.C. 78dd(b) (1976)..21, B 28 U.S.C. 1334(e)(1) (2005)..16, C U.S. Supreme Court Cases Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002)...11 Caminetti v. United States, 242 U.S. 470 (1917)...11 E.E.O.C. v. Arabian American Oil Co. ( Aramco ), 499 U.S. 244 (1991). 6, 16, 17, 19, 21, 22, 23 Foley Bros., Inc. v. Filardo, 336 U.S. 281 (1949) , 17, 22, 23 In re Exide Technologies, Cert denied, 131 S. Ct (2011).. 10 Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct (2013) Local Loan Co. v. Hunt, 292 U.S. 234 (1934)...15 Morrison v. Nat l Austl. Bank Ltd., 130 S. Ct (2010)....6, 17, NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984)...17 iv

6 Robinson v. Shell Oil Co., 519 U.S. 337 (1997)...11 Sale v. Haitian Centers Council, Inc., 509 U.S. 155 (1993) United States v. Ron Pair Enterprises, 489 U.S. 235 (1989)...4, 11 U.S. Circuit Courts of Appeals Cases Barcamerica International USA Trust v. Tyfield Imps., Inc., 289 F.3d 589 (9 th Cir. Cal. 2002) Gorenstein Enterprises v. Quality Care-USA, 874 F.2d 431 (7 th Cir. Ill. 1989).13 Hong Kong & Shanghai Banking Corp. v. Simon (In re Simon), 153 F.3d 991 (9 th Cir. Cal. 1998)...16 In re Exide Technologies, 607 F.3d 957 (3 rd Cir. Del. 2010)....9 In re French, 440 F.3d 145 (4 th Cir. Md. 2006)...16 In re Yonikus, 996 F.2d 886 (7 th Cir. Ind. 1993) In re XMH Corp., 647 F.3d 690 (7 th Cir. Ill. 2011). 13 Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc. (In re Richmond Metal Finishers, Inc.), 756 F.2d 1043 (4 th Cir. Va. 1985)....8, 9, 10, 12, 14, 17 Matter of Rimsat, Ltd., 98 F.3d 956 (7 th Cir. Ind. 1996)...17 Mauro Motors Inc. v. Old Carco LLC (In re Old Carco), Aff d mem., 420 Fed. Appx. 89 (2d Cir. N.Y. 2011) 10, 14 Stegeman v. United States, 425 F.2d 984 (9 th Cir. Or. 1970) (en banc) 16 v

7 Sunbeam Products, Inc. v. Chicago American Mfg., LLC, 686 F.3d 372 (7 th Cir. Ill. 2012) U.S. Bankruptcy Court Cases In re Chipwich, Inc., 54 B.R. 427 (Bankr. S.D. N.Y. 1985)...10 In re HQ Global Holdings, Inc., 290 B.R. 507 (Bankr. D. Del. 2003)..10 In re Old Carco, LLC, 406 B.R. 180 (Bankr. S.D. N.Y. 2009)....10, 14 In re Polycorp Associates, 47 B.R. 671 (Bankr. N.D. Cal. 1985)...18 Raima UK Ltd. v. Centura Software Corp. (In re Centura Software Corp.), 281 B.R. 660 (Bankr. N.D. Cal. 2002) 11, 12 Other Authorities 5 Collier on Bankruptcy (16 th Ed. rev. 2012).. 19 Bankruptcy Abuse Prevention and Consumer Protection Act, Pub. L. No , 119 Stat. 23 (2005) H.R. Rep. No (1952), reprinted in 1952 U.S.C.C.A.N. 1960, H.R. Rep. No (1977), reprinted in 1978 U.S.C.C.A.N , 17 Intellectual Property Licenses in Bankruptcy Act (IPLBA), Pub. L. No , 102 Stat (1988)...9 S. Rep vi

8 Opinions Below The decisions and orders of the U.S. Bankruptcy Court for the District of Moot, decided by Hon. Joel Gaffney, and of the U.S. District of Moot are unreported and therefore are unavailable. This opinion is set forth in the Decision of the U.S. Court of Appeals for the Thirteenth Circuit in Case No , dated October 13, 2013, and is incorporated in the record on appeal (hereinafter R. ). Statement of Jurisdiction The formal statement of jurisdiction is waived pursuant to Competition Rule VIII. Statement of Constitutional and Statutory Provisions The statutory provisions listed below are relevant to determine the present case, and selected statutes are reproduced in the Appendix. 11 U.S.C. 101(35A) (2006) 11 U.S.C. 365 (2006) 11 U.S.C. 541 (2006) 15 U.S.C. 78j (1976) 15 U.S.C. 78dd(b) (1976) 28 U.S.C. 1334(e)(1) vii

9 Docket No In The Supreme Court of the United States October Term, 2014 IN RE FOODSTAR, INC., Debtor FOODSTAR, INC., Petitioner v. Ravi Vohra Respondent On Writ of Certiorari to the United States Court of Appeals for the Thirteenth Circuit Brief For Petitioner TO THE SUPREME COURT OF THE UNITED STATES: Petitioner, Foodstar, Inc., appellee in Case No before the U.S. Court of Appeals for the Thirteenth Circuit, respectfully submits this brief on the merits and asks this Court to reverse the decision of the Thirteenth Circuit Court of Appeals.

10 STATEMENT OF FACTS The Parties. This case involves Foodstar Systems, Inc., the franchisor of Burger Bites, a popular fast food restaurant chain which was very successful due to focusing on serving very small burgers. (R. at 3.) Foodstar is incorporated under the laws of the State of Moot, which is also where its headquarters are located. Id. The first Burger Bites restaurant was opened in Eastlandia. Id. Viraj Deshmukh, an Eastlandian citizen, was the person who developed the idea for Burger Bites. Deshmukh granted Ravi Vohra, also an Eastlandian citizen, a 20-year exclusive license to use the Burger Bites Trademark in Eastlandia. Id. The license agreement, executed in Eastlandia, is governed by Eastlandian law and is similar to standard United States trademark licenses. Id. The provisions of the agreement give the licensor control over many aspects of Vohra s operation. There are 32 Burger Bite restaurants in Eastlandia, all of which operate under franchise agreements with Vohra. Id. The Agreement. Foodstar acquired the worldwide rights to the Burger Bites trademark from Deshmukh shortly after he entered into the Vohra license agreement. (R. at 4-5). The agreement between Foodstar and Deshmukh included all of Deshmukh s rights under the Vohra license agreement. Id. Foodstar had planned on having an initial public offering and in anticipation acquired Minicakes, a successful miniature cupcake chain. Id. Foodstar hoped to merge its miniature burger product line with Minicake s miniature cupcake product line to create franchise stores serving miniature food items. Id. The Bankruptcy Filing. Foodstar s plan was a failure. The demand for miniature cupcakes plummeted, forcing Foodstar to abandon trying to sell cupcakes in its burger stores. Id. 1

11 The resulting losses from the cupcake venture sent Foodstar deep into debt and left it without sufficient operating capital to run its burger franchise. Id. Foodstar filed for Chapter 11 bankruptcy in an effort to reorganize its business but was unable to obtain adequate financing for a reorganization and now plans to liquidate in Chapter 11. (R. at 3-4.) The primary asset of Foodstar s estate is its Burger Bites trademark. (R. at 4.) Foodstar intends to sell the trademark in addition to an assignment to the buyer of all franchise agreements Foodstar has with franchised stores. Id. Foodstar has exclusive rights to the Burger Bites trademark in the United States because it is registered with the United States Patent and Trademark Office. Id. Furthermore, the trademark has been registered in 26 other nations to Foodstar, giving it rights in all of those countries. Id. In all countries except one, Eastlandia, Foodstar both holds the trademark and is the franchisor of the burger restaurants. Id. Petitioner, Foodstar Inc., filed for Chapter 11 bankruptcy in the District of Moot. (R. at 3, 5.) After being unable to obtain financing to help with its reorganization, Foodstar planned to liquidate in Chapter 11. (R. at 3.) Planning to sell its most valuable asset, its Burger Bites trademark, Petitioner filed a motion to reject a license agreement with Respondent, Ravi Vohra. (R. at 5.) The Bankruptcy Court for the District of Moot ruled that rejection of the license agreement was in the best interest of the estate and authorized the rejection. Id. The Subsequent Appeals. Vohra timely appealed the order of the District Court. Id. Notwithstanding the ruling of the District Court and the rejection of the agreement, Vohra refused to relinquish his rights to use the trademark and asserted that he would continue to use and enforce his rights in the trademark in Eastlandia. (R. at 6.) 2

12 In response to Vohra s actions, Foodstar filed an adversary proceeding in the bankruptcy court seeking a declaration that rejection of the license agreement terminated all of Vohra s rights in the trademark. Id. Foodstar also requested an injunction against Vohra s continued use of the trademark. Id. Foodstar moved for summary judgment and the bankruptcy court entered judgment in favor of Foodstar. Id. Vohra s rights were declared terminated and he was enjoined from using the Burger Bites trademark. Id. Vohra appealed both orders and the district court combined the appeals and affirmed. Id. Vohra appealed to the United States Court of Appeals for the Thirteenth Circuit. The court reversed the judgment of the district court and ruled that a rejection of a trademark license does not terminate the licensee s rights and the presumption against extraterritorial application barred application of Section 365 of the United States Bankruptcy Code to the license agreement. (R. at 7, 10.) Foodstar petitioned for a writ of certiorari with the Supreme Court of the United States. The petition was granted on December 6, 2013 and the appeal is now before this Court. SUMMARY OF THE ARGUMENT Bankruptcy is a key tool that allows businesses to liquidate or restructure their existing liabilities to help the estate get as much value for certain assets as possible. 11 U.S.C. 365(a) grants the debtor the ability to reject any executory contract. A trademark licensing agreement is an executory contract, thus it is able to be rejected pursuant to 365(a). The rejection of a contract pursuant to 365(a) is not merely a breach. While 365(g) states rejection constitutes a breach, it does not state that it is limited to being only a breach. The 3

13 ability to breach a contract is an ability a debtor does not need the bankruptcy code to grant; it is an undisputed non-bankruptcy ability. Thus, by using the term rejection instead of breach, Congress intended for rejection of contracts pursuant to 365(a) to encompass more than a mere breach. Courts have supported this reasoning by holding that rejection terminates the rights of a licensee when the licensing agreement has been rejected pursuant to 365(a). Therefore, Foodstar s rejection of the trademark licensing agreement is not merely a breach, it ends any rights Vohra has in the Burger Bites trademark. Vohra is not protected under 11 U.S.C. 365(n)(1), which allows for licensees of intellectual property to retain rights to the licensed property after the licensing agreement has been rejected. Intellectual property as defined under the bankruptcy code does not include trademarks. Thus, Vohra, being the licensee of a trademark, does not have the option of retaining any rights to the Burger Bites trademark, which means his rights in the trademark are terminated. Furthermore, legislative history cannot be used to determine if Congress intended for trademarks to be covered under 365(n)(1) because this Court has stated that when the language of a statute is plain and unambiguous, the Court s only function is to enforce the statute according to its terms. United States v. Ron Pair Enters., 489 U.S. 235 (1989). The definition of intellectual property under the bankruptcy code does not include trademarks, making it clear and unambiguous 365(n)(1) does not protect licensees of trademarks. Moreover, public policy favors the licensee of a trademark having its rights to the trademark terminated when the licensing agreement has been rejected pursuant to 365(a). Allowing for a licensee to retain rights to a trademark despite the rejection of the trademark s licensing agreement would run counter to the Bankruptcy Code s policy. Also, it could eventually lead to debtors who reject trademark licensing agreement because it is in their best 4

14 interest to actually lose their own trademarks. Therefore, ruling that a licensee s rights to a trademark are terminated when the trademark licensing agreement has been rejected pursuant to 365(a) will prevent these possible negative consequences from occurring. Further, in order to properly effectuate the purposes of the Bankruptcy Code, 365 should be applied extraterritorially to allow Foodstar to reject the Vohra license. Section 365 is organically intertwined with other provisions of the Bankruptcy Code that do have express statements of extraterritorial application. Foodstar should be allowed to maximize the value of their estate through extraterritorial application of 365. The Bankruptcy Code is a unique statutory scheme that requires a flexible application of the presumption against extraterritoriality. The Bankruptcy Code is not meant to be interpreted on a piecemeal basis. There are provisions that are organically intertwined with other provisions of the Code. These provisions should be read together to divine Congressional intent rather than read in isolation. The underlying property subject to the 365 rejection power is property of the estate pursuant to 11 U.S.C Thus, although 365 does not contain an express extraterritorial statement, the property subject to 365 does have an express statement of extraterritoriality attached to it. It would do an injustice to sever the reading of 365 from that of 541 because the two provisions are naturally interrelated. The wherever located and by whomever held language of 541(a) is a clear statement of extraterritoriality. 11 U.S.C U.S.C of the Bankruptcy Code provides United States courts jurisdiction of all property wherever located of the debtor. The jurisdictional reach of the United States bankruptcy courts and the scope of property of the bankruptcy estate must be applied generally to the other Bankruptcy Code provisions. 5

15 The ability to reject executory contracts is a critical purpose of the Bankruptcy Code. It is a sufficiently important purpose that could rebut the presumption against extraterritoriality on its own. Generally, the prevention of extraterritorial application of 365 would impede and potentially altogether prevent the ability to successfully reorganize for many debtors. Here, if the presumption were to be applied it would substantially affect the value of the estate of Foodstar. However, the express and implied connection between 365 and 541 makes completely unnecessary the application of the presumption to 365. The methodology used in Morrison v. Nat l Austl. Bank Ltd., 130 S. Ct (2010), when applied to the Bankruptcy Code would find that 365 applies extraterritorially. In Morrison, the court was analyzing 10(b) of the Exchange Act. 15 U.S.C. 78j (1976). Section 10(b) enabled a cause of action to be brought for certain securities violations. That section was isolated by nature and severable from the rest of the Exchange Act. The presumption against extraterritoriality cannot be applied in the same way and with the same results to the Bankruptcy Code. Here, 365 is not an isolated provision. It is interconnected and meaningless without reference to other provisions of the Bankruptcy Code. The Bankruptcy Code simply cannot be treated equally as severable as the Exchange Act. Thus, the rules and principles applied in Morrison would still reach the just result in this case of finding 365 to apply extraterritorially. The rule from E.E.O.C. v. Arabian American Oil Co., 499 U.S. 244 (1991) ( Aramco ), is not a flat rule that requires an extraterritorial statement in each statutory provision to be applied abroad. The court in Aramco does not require a clear statement in each provision, but will look to the Act as a whole in order to determine congressional intent. Here, there is a clear congressional intent to apply 365 extraterritorially via 541. Aramco would not require a 6

16 reading of 365 in isolation, and 365 should be read in conjunction with other relevant provisions in order to truly ascertain congressional intent regarding extraterritorial reach. ARGUMENTS AND AUTHORITIES I. THE COURT OF APPEALS FOR THE THIRTEENTH CIRCUIT WAS INCORRECT IN HOLDING THAT REJECTION OF A TRADEMARK LICENSING AGREEMENT UNDER 11 U.S.C. 365 DOES NOT TERMINATE THE LICENSEE S RIGHT TO CONTINUE TO USE THE TRADEMARK. 11 U.S.C. 365(n)(1) gives special protection to licensees of intellectual property whose licenses have been rejected pursuant to 11 U.S.C. 365(a). Trademarks are a unique type of intellectual property and Congress has recognized this fact by excluding trademarks from the definition of intellectual property which is contained in the bankruptcy code. See 11 U.S.C. 101(35A). Due to this, licensees of trademarks are not afforded the same protections as licensees of other intellectual property. Thus, when Foodstar rejected its trademark licensing agreement with Vohra, Vohra does not retain any rights to the trademark. A. Rejection of an executory contract under 11 U.S.C. 365 is not only a breach, it causes a licensee to lose its rights to a trademark as well so as to give the bankruptcy estate the broadest possible relief. The majority for the Court of Appeals for the Thirteenth Circuit stated that rejection of an executory contract pursuant to 11 U.S.C. 365(a) only constituted a breach based on the language of 365(g). (R. at 8). This view is wrong. If rejection equals breach then Congress would not need to include such a power in the bankruptcy code because a debtor could breach a contract at any time by simply stopping performance or repudiating the contract and causing an anticipatory breach. Therefore, the power of rejection must provide the debtor with something more than simply its undisputed non-bankruptcy ability to breach. This causes the term rejection to become ambiguous due to the fact it is not equal to the term breach and 7

17 Congress did not define it. Thus, since the language of the statute is ambiguous, legislative history can play a part in determining what it means. This is exactly what the Court of Appeals for the Fourth Circuit did in Lubrizol Enterprises, Inc v. Richmond Metal Finishers, Inc. (In re Richmond Metal Finishers Inc.), 756 F.2d 1043 (4th Cir. 1985). In Lubrizol, Richmond Metal Finishers entered into a contract with Lubrizol which granted Lubrizol a license to use a metal coating process technology which was owned by Richmond Metal Finishers. Id. at 1045 Richmond Metal Finishers later filed for Chapter 11 bankruptcy and sought to reject the licensing agreement with Lubrizol pursuant to 11 U.S.C. 365(a.). Id. It was determined that the metal coating process technology was the most valuable asset of the estate and as such, it being unencumbered by the license with Lubrizol would help the estate get the most value for it. Id. at The court held that rights granted under a licensing agreement to a licensee end when the agreement has been rejected pursuant to 365(a). Id. at This ruling shows that rejection constitutes more than a breach because a breach would not terminate the rights of a party. The ruling in Lubrizol is supported by the fact Congress intended for claims arising under the Bankruptcy Code to be treated as prepetition claims when rejection has occurred. H.R. Rep. No at 349; S. Rep at 60. The definition of a claim under the Bankruptcy Code is the broadest possible in order to give the broadest possible relief. H.R. Rep at 309; S. Rep. No at Thus, a claim arising due to rejection should be viewed broadly, meaning that it should be viewed as more than a breach. That is exactly what the court in Lubrizol did; evidencing that it looked at the intentions of Congress when making its ruling. This Court should use Lubrizol as a guide and rule that Vohra no longer has any rights to the Burger Bites trademark. The case at bar and Lubrizol are similar because in both cases 8

18 11 U.S.C. 365(a) was used to reject a licensing agreement. In Lubrizol, it was determined that a licensee s rights under a licensing agreement end when rejection has occurred. This supports giving the debtor the broadest relief possible. Therefore, if Richmond Metal Finishers was able to end the rights of a licensee in Lubrizol, then this Court should hold that Foodstar s rejection of its licensing agreement with Vohra ends Vohra s rights in the Burger Bites trademark. B. Foodstar s rejection of the trademark licensing agreement terminates Vohra s rights to use the Burger Bites trademark because trademarks are not protected under 11 U.S.C. 365(n)(1). In Lubrizol, 756 F.2d 1043 (4 th Cir. 1985), the court held that rejection of a licensing agreement terminated the rights granted to a licensee under the agreement. Had the court in Lubrizol been wrong, Congress could have simply passed legislation to reverse the ruling; however it passed legislation that only slightly modified its holding. Congress enacted the Intellectual Property Licenses in Bankruptcy Act (IPLBA) in response to Lubrizol. Pub. L. No , 102 Stat (1988). One of the main provisions of the IPBLA was codified at 11 U.S.C. 365(n)(1). 11 U.S.C. 365(n)(1)(B) states if a rejected license is one of intellectual property, then a licensee may elect to retain its rights. According to 11 U.S.C. 101(35A), the term intellectual property means: (A) trade secret; (B) invention, process, design, or plant protected under title 35; (C) patent application; (D) plant variety; (E) work of authorship protected under title 17; or (F) mask work protected under chapter 9 of title 17. Nowhere in the statue is the term trademark seen. The use of the term means instead of includes is more limiting because it makes the term definitional and not categorical. It also shows, Congress has deliberately limited 365(n) protection only to the intellectual property enumerated by the statute. Raime UK Ltd. v. Centura Software Corp. (In re Centura Software Corp.), 281 B.R. 660, (Bankr. N.D. 9

19 Cal. 2002). See also In re Exide Technologies, 607 F.3d 957, (3 rd Cir.) (Ambro, J., concurring), cert. denied, 131 S. Ct (2011). In this case, Foodstar used 11 U.S.C. 365(a) to reject its trademark licensing agreement with Vohra. Since trademarks are not intellectual property under 11 U.S.C. 101(35A), they are not subject to 11 U.S.C. 365(n)(1). This means that the licensee of a trademark licensing agreement may not elect to retain its rights after rejection has occurred pursuant to 365(a). Thus, when Foodstar rejected its trademark licensing agreement with Vohra, Vohra did not retain any rights in the Burger Bites trademark. Therefore, Vohra may no longer use the Burger Bites trademark and his rights are effectively terminated. Furthermore, if Congress really intended for trademarks to be included in the definition of intellectual property under 101(35A) and thus be covered by any part of 365(n)(1), it could have added trademarks to 101(35A) when it enacted the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, which was a major amendment to the bankruptcy code. Pub. L. No , 119 Stat. 23 (2005). Congress not addressing the issue when it made a major change to the bankruptcy code evidences Congress intent for trademarks to not be covered by any part of 365(n)(1). In addition to the court in Centura Software Corp., many courts have found that based on 11 U.S.C. 365(n)(1), Congress meant for the Lubrizol holding to apply to trademarks. In re Old Carco LLC, 406 B.R. 180 (Bankr. S.D. N.Y. 2009); In re HQ Global Holdings, Inc., 290 B.R. 507 (Bankr. D. Del. 2003); In re Chipwich, Inc., 54 B.R. 427 (Bankr. S.D. N.Y. 1985). This Court should follow in the footsteps of these courts and use Lubrizol as a guide and rule that Vohra no longer has any rights to the Burger Bites trademark. 10

20 C. Based on the plain language of 11 U.S.C. 365(n)(1), Congressional intent should not be considered when determining whether a licensee of a trademark retains any rights when the trademark license agreement has been rejected. Whether Foodstar s rejection of the trademark licensing agreement causes Vohra to lose his rights in the Burger Bites trademark is determined by 11 U.S.C. 365(n)(1), thus this case is one of statutory construction. This Court has stated, In all statutory construction cases, we begin with the language of the statute. Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002). This court has also stated when, the statute s language is plain, the sole function of the courts is to enforce it according to its terms. United States v. Ron Pair Enters., 489 U.S. 235, 241 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485 (1917)). Thus, the examination ends, if the statutory language is unambiguous. Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997). In this case, the plain language of 11 U.S.C. 101(35A) and 365(n)(1) is unambiguous. The term intellectual property does not mean trademarks under 101(35A). Thus, trademarks are not protected under 365(n)(1). Since this means the licensee of a trademark does not have the option to retain his rights in the trademark after the contract has been rejected, the only logical conclusion is that the licensee retains no rights to the trademark at all. Therefore, in this case, Foodstar s rejection of the trademark licensing agreement causes Vohra to lose all rights he has in the trademark. In Raima UK Ltd. v. Centura Software Corp., Centura Software filed for Chapter 11 bankruptcy and rejected a trademark licensing agreement it had with Raima UK. In re Centura, 281 B.R Raima UK argued that it still had rights to the trademark because legislative history showed that Congress wanted more information on the effects of rejection of trademarks and that is why it was not included in 365(n). Id. at 670. The court stated resorting to legislative history was inappropriate when the statute was clear and that it was unambiguous that 11

21 365(n) did not apply to trademarks. Id. The court then held that Raima UK lost all rights that it had to the trademark because licensees under trademark licensing agreements do not retain their rights to a trademark after the agreement has been rejected pursuant to 365(a). Id. The case at bar is similar to Centura due to the fact both involve a license agreement being rejected pursuant to 365(a) post Lubrizol and the enactment of the IPBLA. This Court should use Centura as a guide and rule that Vohra no longer has any rights to the Burger Bites trademark because trademarks are not protected under 365(n) and furthermore, legislative history should not be looked to due to the fact that the language of the Bankruptcy Code in regards to intellectual property is plain and unambiguous that trademarks are not covered by any part of 365(n). Some courts have held that Congress did not include trademarks within the term intellectual property because they were still studying the effects of rejection on trademarks. See Sunbeam Products, Inc. v. Chicago American Mfg., LLC, 686 F.3d 372 (7th Cir. 2012). Even if this legislative history is true, If a statute can be interpreted on its face, it is not necessary to delve into its legislative history. Centura, 281 B.R. 660, 670. Thus, due to the fact 11 U.S.C. 101(35A) and 365(n) are plain and unambiguous, there is no need to delve into the history of the legislation which created them, in this case the IPBLA. Admittedly, Petitioner argued earlier about looking to legislative history and intent to show that rejection is not equal to breach under 11 U.S.C. 365(a). However, the term rejection cannot be interpreted on its face. This is due to the fact that if rejection was equal to breach then Congress could have just used the term breach. Breaching contracts is not a special bankruptcy power; it is an undisputed non-bankruptcy ability. Therefore, the term rejection being used indicates that something more than a breach occurs upon rejection and 12

22 this, combined with the fact that unlike intellectual property, rejection is never defined under the Bankruptcy Code, makes the term ambiguous. Thus, this Court can make an inquiry into the legislative history of what rejection is supposed to entail, but cannot do the same for intellectual property. Therefore, following the language of the statute, Vohra is not afforded the protection of 365(n)(1) and as such does not retain any rights in the Burger Bites trademark due to the licensing agreement being rejected pursuant to 365(a). D. Public policy supports rejection causing a licensee under a trademark licensing agreement to lose its rights in the trademark. Trademarks are substantially different than other types of intellectual property. It has been stated, The purpose of a trademark, after all, is to identify a good or service to the consumer, and identity implies consistency and a correlative duty to make sure that the good or service really is of consistent quality, i.e., really is the same good or service. Gorenstein Enters. v. Quality Care-USA, 874 F.2d 431, 435 (7th Cir. 1989). Put another way, the reason trademarks are recognized and protected is due to them giving consumers a quick reference to the source and quality of the product. In re XMH Corp., 647 F.3d 690 (7th Cir. 2011). However, due to this feature of trademarks, The owner of a trademark has a duty to ensure the consistency of the trademarked good or service. If he does not fulfill this duty, he forfeits the trademark. Gorenstein, 874 F.2d at 435. See also Barcamerica Int l USA Trust v. Tyfiled Imps., Inc., 289 F.3d 589 (9th Cir. 2002). This means that a debtor could lose all rights in a trademark if rejection does not terminate a licensee s rights to use the trademark. This is due to the fact the debtor would no longer be able to enforce standards on the licensee due to the fact he rejected the contract which would allow him to enforce said standards. This would cause the estate to lose a significant asset 13

23 and thus would not allow for the broadest relief possible. Furthermore, by causing a debtor to lose a significant asset of the estate, a court would seriously impair the Bankruptcy Code s reorganization policy. In addition, this Court ruling that a licensee of a trademark retains its rights to the trademark despite the trademark licensing agreement being rejected pursuant to 365(a) could have dire consequences in the future. This Court would essentially be approving the beginning of a process in which any debtor could lose his rights to a trademark due to the simple fact that he sought to reject a trademark licensing agreement because it was in his best interest. Bankruptcy protection is about giving debtor businesses a fresh start, not a possible death sentence. These consequences could be avoided by using Lubrizol as a guide, such as what occurred in In re Old Carco LLC. 406 B.R. 180 (Bankr. S.D.N.Y.), aff d mem., Mauro Motors Inc. v. Old Carco LLC, 420 Fed. Appx. 89 (2d Cir. 2011). In Old Carco, the court stated that rejection of franchise agreements between Chrysler and a number of dealerships, which included licenses of the Chrysler trademark, terminated the rights of the licensee dealerships in the Chrysler trademark. Id. Had the court ruled otherwise, Chrysler would have lost a valuable asset of the estate, failed, and so would have the American automotive industry. In this case, if this Court holds that Foodstar s rejection of the trademark licensing agreement does not terminate Vohra s rights to use the Burger Bites trademark, the Court will not only do significant harm to Foodstar s Chapter 11 liquidation, it will undermine the reorganization policy of the Bankruptcy Code and cause harm to future debtors by allowing them to possibly lose their own trademarks. These negative results can and should be avoided by holding that Foodstar s rejection of the trademark licensing agreement terminates Vohra s right to use the Burger Bites trademark. 14

24 II. THE BANKRUPTCY CODE PROVIDES FOR EXTRATERRITORIAL APPLICATION OF 11 U.S.C Section 365 should be applied extraterritorially in order to properly effectuate the purpose of the Bankruptcy Code. Foodstar, Incorporated should be able to reject their trademark licensing agreement with Ravi Vohra in order to maximize the value of the estate that is available for payment to creditors. Section 365 is entangled with section 541 of the Bankruptcy Code. These provisions should not be interpreted in isolation, and the clear language of extraterritoriality of 541 organically invokes extraterritorial application of 365. The jurisprudence of the presumption against extraterritoriality has been applicable to vastly disparate statutory schemes and is not a one size fits all application. A. 11 U.S.C. 541 s Wherever Located by Whomever Held language applies to 365. The Bankruptcy Code is not meant to be applied in sectional isolation. 11 U.S.C. 365 is just one tool in the complete toolbox of the Bankruptcy Code, enacted to afford a fresh start to the honest but unfortunate debtor... unhampered by the pressure and discouragement of preexisting debt. Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). Certain provisions of the Bankruptcy Code naturally invoke the application of other provisions of the Bankruptcy Code, not based on the language of the provision, but based on what the provision does and how that action interacts with the other provisions. 11 U.S.C. 365 allows the trustee in bankruptcy to assume or reject executory contracts. Executory contracts are part of the property of the estate, being a legal or equitable interest pursuant to 541(a)(1). While there is no language in 365 that indicates extraterritorial reach, 365 is an interrelated provision to 541, which has been held to apply extraterritorially. 15

25 The wherever located and by whomever held language of 541(a) clearly indicates an intention to extend the Bankruptcy Code beyond territorial limits on the United States. Hong Kong & Shanghai Banking Corp. v. Simon (In re Simon), 153 F.3d 991, 996 (9th Cir. 1998). Additionally, the bankruptcy jurisdictional rules have worldwide reach. Section 1334 granted the United States courts exclusive jurisdiction... of all of the property, wherever located, of the debtor... and of property of the estate. 28 U.S.C. 1334(e)(1) (emphasis added). Pursuant to 541 of the Bankruptcy Code, all of a debtor's property, whether domestic or foreign, is property of the estate subject to the bankruptcy court's in rem jurisdiction. See In re Simon, 153 F.3d 991 (9th Cir.1998). Section 541's wherever located language first appeared in the Bankruptcy Code in 1952; Congress explained that the amendment make[s] clear that a trustee in bankruptcy is vested with the title of the bankrupt in property which is located without, as well as within, the United States. H.R.Rep. No , at 15 (1952), reprinted in 1952 U.S.C.C.A.N.1960, Thus, property of the estate includes both foreign and domestic property. In re French, 440 F.3d 145, 151 (4th Cir. 2006). Congress has the unquestioned authority to enforce its laws beyond the territorial boundaries of the United States. E.E.O.C. v. Arabian American Oil Co., 499 U.S. 244, 248 (1991) ( Aramco ). Whether Congress has exercised that authority in a particular case is a matter of statutory construction. Stegeman v. United States, 425 F.2d 984, 986 (9 th Cir. 1970)(en banc). In construing a statute to ascertain Congress' territorial intent, Courts begin with the presumption that the legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States. Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285 (1949). With the presumption against extraterritoriality, Courts analyze Congressional intent by first examining the language of the act for indications of intent regarding extraterritorial 16

26 application. Aramco, 499 U.S. at 248. In addition to the plain statutory words, intent can be found with reference to similarly-phrased legislation, Id. at , or the overall statutory scheme. Foley Bros., 336 U.S. at 286. For the Bankruptcy Code, the language of the statute, express statements in the legislative history, and the context of bankruptcy practice all strongly support extraterritorial application of the entire code to all aspects of any bankruptcy case. (R. at 21), see Matter of Rimsat, Ltd., 98 F.3d 956 (7th Cir. 1996), In re Simon, 153 F.3d 991 (9 th Cir. 1998). However, when a statute provides for some extraterritorial application, the presumption against extraterritoriality operates to limit that provision to its terms. Morrison v. National Australia Bank Ltd., 561 U.S. 247, 130 S. Ct (2010). Here, the express statement of extraterritorial reach in 541 is not limited to just 541. The ability to reject executory contracts is an important purpose of bankruptcy. The presumption against extraterritoriality may be rebutted if the issues touch and concern the territory of the United States, and the impact must have sufficient force to displace the presumption. Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659, 1669 (2013). Section 365(g) treats rejection of an executory contract as a breach. 11 U.S.C. 365(g). The legislative history of 365(g) makes clear that the purpose of the provision is to provide only a damages remedy for the non-bankrupt party. Lubrizol Enterprises Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043, 1048 (4 th Cir. 1985); H.R. Rep. No , 95th Cong., 2d Sess. 349, reprinted in 1976 U.S. Code Cong. & Ad. News 5963, [T]he authority to reject an executory contract is vital to the basic purpose [of] a chapter 11 reorganization, because [it] can release the debtor's estate from burdensome obligations that can impede a successful reorganization. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 528 (1984). Here, the trademark licensing agreement 17

27 between Foodstar and Vohra, which originated in Eastlandia, touches and concerns the territory of the United States because it affects the ability of a company, organized in the United States, to reorganize pursuant to chapter 11 bankruptcy. Effective reorganization is a critical purpose of bankruptcy which necessitates extraterritorial application of 365. Section 365 is impliedly and expressly brought into the scope of 541 of the Bankruptcy Code. [E]very conceivable [property] interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within the reach of 541. In re Yonikus, 996 F.2d 886, 869 (7th Cir. 1993). Section 541(c) was promulgated to invalidate restrictions on the transfer of property of the debtor, in order that all the interests of the debtor in property will become property of the estate. H.R. Rep. No. 595, 95th Cong. 1 st Sess (1977). Section 541(c)(1)(B) provides that an interest of the debtor in property becomes property of the estate under 541(a)(1), (a)(2), or (a)(5) despite contrary provisions in any agreement or nonbankruptcy law that is conditioned... on the commencement of a case under this title... and that effects... a forfeiture, modification, or termination of a debtor's interest in property. 11 U.S.C. 541(c)(1)(B) (emphasis added). Here, if the presumption were applied to 365 it would be affecting Foodstar's ability to modify or terminate the licensing agreement with Vohra. Section 541 by its terms brings that license agreement into the estate notwithstanding the application of the presumption against extraterritoriality. Because the underlying property subject to the 365 rejection power is property of the estate, and the estate contains property wherever located, the presumption cannot be applied to 365. Section 541 is a provision of general application that operates to invalidate restrictions on the transfer of property of or to the estate. In re Polycorp Associates, 47 B.R. 671, 672 (Bankr. N.D.Cal. 1985); see also, H.R. Rep. No. 595, 95th Cong. 1st Sess (1977). The leading 18

28 treatise on bankruptcy explains that 'personal' property interests or 'personal' rights that may not be transferred under federal or state law will nevertheless become property of the estate under 541(c)(1) and [w]hether the property may be sold, used or leased or whether an executory contract or unexpired lease can be assumed or rejected is determined by other sections of the Code. 5 Collier on Bankruptcy (16 th ed. rev. 2012). Section 365's prescription for the rejection of executory contracts and the effect thereof is necessarily included in the definition of property of the estate in 541. Thus, 541's express statement of extraterritoriality also applies to actions done pursuant to 365. B. The Bankruptcy Code requires unique considerations in the application of the presumption against extraterritoriality. The Courts in Morrison, 130 S. Ct (2010), and Aramco, 499 U.S. 244 (1991), applied the presumption against extraterritoriality to statutory structures very different from the Bankruptcy Code. In Morrison, as with Aramco, the Supreme Court of the United States rejected overseas application of United States law because the probability of incompatibility with the applicable laws of other countries is so obvious that if Congress intended such foreign application it would have addressed the subject of conflicts with foreign laws and procedures. Aramco, 499 U.S. at 256 (1991). In Morrison, the Supreme Court rejected and replaced the 'conduct' and 'effects' analysis that had been utilized in the federal courts for over 40 years. However, the Court in Morrison [did] not say... that the presumption against extraterritoriality is a 'clear statement rule'; if by that is meant a requirement that a statute say 'this law applies abroad.' Assuredly context can be consulted as well. Morrison, 130 S. Ct. at The Court then went on to say that sources of statutory meaning should be consulted to give the most faithful reading of the text. Id. By analyzing sources of statutory meaning here, the most faithful reading of 365 can be done. 19

29 The issue in Morrison was whether the judicially implied private right of action under [section] 10(b) of the [Exchange] Act should be allowed in class action fraud claims by foreign investors who purchased foreign stock issued by a foreign company. Morrison, 130 S. Ct. at The Court in Morrison upheld the dismissal of the complaint and based its decision on the presumption against extraterritoriality being centered on the thought that Congress's role to legislate is in the interest of domestic concerns. Id. at The Court also noted that this presumption may be overcome if Congress explicitly displays its intent in the statutory language or legislative history. Id. The Court found that Congress explicitly included jurisdictional statements in other sections of the Exchange Act, but not Section 10(b). Id. at Since Congress took the time to include precise jurisdictional language in those sections and not in section 10(b), the Court believed that Congress did not intend for extraterritorial jurisdiction to apply in foreign-cubed cases. The Court reasoned that if Congress had wanted it, Congress would have included it within the statutory language. The results of judicial-speculation-made-law - divining what Congress would have wanted if it had thought of the situation before the court - demonstrate the wisdom of the presumption against extraterritoriality. Rather than guess anew in each case, we apply the presumption in all cases, preserving a stable background against which Congress can legislate with predictable effects. Morrison at The Morrison Court found that there was one provision in the Exchange Act that implicated extraterritorial application, 30(b) of Exchange Act: The provisions of this chapter or of any rule or regulation thereunder shall not apply to any person insofar as he transacts a business in securities without the jurisdiction of the United States, unless he transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of this chapter. 20

30 15 U.S.C.A. 78dd. The Court stated it would be odd for Congress to indicate the extraterritorial application of the whole Exchange Act by means of a provision imposing a condition precedent to its application abroad. Morrison at Unlike the Exchange Act, the Bankruptcy Code does contain an affirmative indication of extraterritoriality in 541. Section 365 is one tool in the toolbox of the Bankruptcy Code. Section 10(b) is a provision that for the most part can be applied in isolation from the rest of the Exchange Act. The Morrison Court looked at the Exchange Act as a whole, and in looking at the Exchange Act as a whole there was no finding of an interconnection between 78dd's express statement of extraterritoriality and 10(b)'s application extraterritorially. Section 365 of the Bankruptcy Code cannot be severed so easily from the rest of the Bankruptcy Code. A separate statement of extraterritorial application of 10(b) may have been a necessary finding for the Morrison court in the Exchange Act context, but it is simply not necessary for 365. Section 541 brings 365 within its extraterritorial gambit. The majority opinion in Aramco identified congressional intent as the touchstone of the presumption against the extraterritorial application of United States law. Aramco at However, the Court in Morrison gave a broad definition of congressional intent of extraterritorial application by stating our cases both before and after Aramco make perfectly clear that the Court continues to give effect to 'all available evidence about the meaning' of a provision when considering its extraterritorial application, lest we defy Congress' will.' Morrison at 2891, citing Sale v. Haitian Centers Council, Inc., 509 U.S. 155, 177 (1993). The concurrence in Morrison found that the presumption against extraterritoriality can be useful as a theory of congressional purpose, a tool for managing international conflict, a background norm, a tiebreaker. It does not relieve courts of their duty to give statutes the most 21

31 faithful reading possible. Morrison at 2892 (concurrence, J.Stevens). Here, even through adherence of Morrison's analytical framework, 365 necessarily implicates extraterritorial application. C. The 365 rejection power is a substantial power that would adversely affect a debtor s ability to reorganize in the United States without extraterritorial application. Aramco does not preclude application of 365 extraterritorially. The Aramco rule is not a flat rule that requires inclusion of an extraterritorial statement in each statutory provision. Some applications of the Aramco rule require a more flexible approach. Aramco stands for the proposition that the legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States. Aramco, 499 U.S. at 248. Aramco requires courts to look to see whether language in the relevant [a]ct gives any indication of a congressional purpose to extend its coverage beyond places over which the United States has sovereignty or has some measure of legislative control. Aramco at 248. However, this presumption is generally not applied where the failure to extend the scope of the statute to a foreign setting will result in adverse effects within the United States. In re Simon, 153 F.3d 991, 995 (9 th Cir. 1998). The presumption against extraterritoriality is also not applicable when the regulated conduct is 'intended to, and results in substantial effects within the United States.' Id. The Court in Foley Bros., in applying the presumption against extraterritoriality, looked at whether language in the [relevant act] gives any indication of a congressional purpose to extend its coverage beyond places over which the United States has sovereignty or has some measure of legislative control. Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285 (1949). Here, looking at the Bankruptcy Code as a whole, there is a clear congressional purpose indicated in 22