Pg 1 of 18 Xochitl S. Strohbehn QUINN EMANUEL URQUHART & SULLIVAN, LLP 51 Madison Avenue, 22nd Floor New York, NY 10010 Tel: (212) 849-7000 Fax: (212) 849-7100 Eric Winston Rachel Appleton QUINN EMANUEL URQUHART & SULLIVAN, LLP 865 South Figueroa, 10th Floor Los Angeles, CA 90017 Tel: (213) 443-3000 Fax: (213) 443-3100 David Eiseman QUINN EMANUEL URQUHART & SULLIVAN, LLP 1299 Pennsylvania Ave. NW, Suite 825 Washington, DC 20004 Tel: (202) 538-8000 Fax: (202) 538-8100 Co-Counsel for Creditors Ricoh Company, Ltd. and Ricoh Americas Corporation UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In re: ) Chapter 11 ) EASTMAN KODAK COMPANY, et al., ) Case No. 12-10202 (ALG) ) Debtor. ) (Jointly Administered) ) LIMITED OBJECTION OF RICOH COMPANY, LTD. AND RICOH AMERICAS CORPORATION TO DEBTORS MOTION FOR AN ORDER (I) APPROVING (A) THE KPP GLOBAL SETTLEMENT AND (B) PROCEDURES FOR THE ASSUMPTION AND ASSIGNMENT OF CERTAIN CONTRACTS AND (II) AUTHORIZING THE DEBTORS (A) ENTRY INTO AGREEMENTS WITH RESPECT TO THE TRANSFER OF THE DOCUMENT IMAGING AND PERSONALIZED IMAGING BUSINESSES AND (B) USE, LICENSE AND LEASE OF PROPERTY OF THE ESTATE IN CONNECTION THEREWITH
Pg 2 of 18 TABLE OF CONTENTS Page INTRODUCTION...1 CLARIFICATIONS...2 FACTUAL BACKGROUND...3 A. Ricoh s and Kodak s Prepetition Relationship...3 B. Ricoh s Prepetition Claims...4 C. Ricoh s Postpetition Claim Adversary Proceeding...5 ARGUMENT...6 A. Any Order Approving the Motion Must Expressly Provide That Kodak Is Obligated to Preserve Documents and Information That Is Discoverable in Connection With the Kodak Lawsuit, the Prepetition Claims, and the Postpetition Claim Adversary Proceeding...6 B. The Sale Cannot Relieve the Purchaser From Post-Sale Liability Associated With Infringing Inventory...7 C. Ricoh Preserves any and all of Its Rights to Object to Attempted Assumption/Assignment of the Kodak PLA...9 D. The Procedures Proposed in the Motion and the Lack of Information Included in the Motion Significantly Impair Ricoh s Ability to Protect Its Rights...9 CONCLUSION...14 i
Pg 3 of 18 TABLE OF AUTHORITIES Cases Page In re CLFC, Inc., 89 F.3d 673 (9th Cir. 1996)...13 In re Fleming Companies, Inc., 499 F.3d 300 (3d Cir. 2007)...11 Fujitsu Ltd. v. Fed. Exp. Corp., 247 F.3d 423 (2d Cir. 2001)...6 In re Great Atl. & Pac. Tea Co., Inc., 472 B.R. 666 (S.D.N.Y. 2012)...11 In re MF Global Holdings, Ltd., 466 B.R. 239 (Bankr. S.D.N.Y. 2012)...12 In re Nat l Shoes, Inc., 20 B.R. 55 (Bankr. S.D.N.Y. 1982)...11 In re Patient Education Media, Inc., 210 B.R. 237 (Bankr. S.D.N.Y. 1999)...13 Perlman v. Catapult Entm t, Inc. (In re Catapult Entm t, Inc.), 165 F.3d 747 (9th Cir. 1999)...13 Statutes 11 U.S.C. 363... passim 11 U.S.C. 365... passim 35 U.S.C. 154...8 35 U.S.C. 271(a)...8 ii
Pg 4 of 18 Ricoh Company, Ltd. and Ricoh Americas Corporation (collectively, Ricoh ), hereby file this limited objection (the Objection ) to the Debtors Motion for Orders (I) (A) Approving Bidding Procedures for the Sale of the Document Imaging Business,(B) Authorizing the Stalking Horse Bid Protections, (C) Approving Procedures for the Assumption and/or Assignment of Certain Contracts, (D) Approving Notice Procedures, and (E) Setting a Date for the Sale Hearing; and (II) Authorizing the (A) Debtors Entry into an Asset Purchase Agreement with Respect to the Sale of the Document Imaging Business, (B) Use, License and Lease of Property of the Estate in Connection Therewith, (C) Assumption and/or Assignment of Certain Contracts, (D) Debtors Exercise of Corporate Governance Rights and (E) Entry Into Certain Ancillary Agreements, filed April 18, 2013 [Dkt No. 3515] (the Motion ). In support of its Objection, Ricoh respectfully states as follows. INTRODUCTION 1 Ricoh is a creditor of Eastman Kodak Company ( Kodak ), a debtor and debtor in possession in the above-captioned chapter 11 case. Ricoh has asserted both prepetition claims ( Prepetition Claims ) and postpetition administrative expense priority claims ( Postpetition Claims ) concerning Kodak s infringement of several patents held by Ricoh. As discussed below, Ricoh has commenced an adversary proceeding in respect of its postpetition claim (the Postpetition Claim Adversary Proceeding ). Ricoh is also the target of a suit brought prepetition by Kodak in the United States District Court for the Southern District of New York (the Kodak Lawsuit ) in which Kodak claims Ricoh breached that certain Patent License Agreement (the Kodak PLA ). Ricoh s Prepetition Claims give rise to rights of setoff, which under Bankruptcy Code section 506(a) are treated as secured claims. 1 All terms not otherwise defined herein have the same meanings as defined in the Motion. 1
Pg 5 of 18 In the Motion, Kodak seeks court approval to sell their global Document Imaging Business and Personalized Imaging Business (the Businesses ) to KPP Trustees Limited, as trustee for the Kodak Pension Plan of the United Kingdom ( KPP or the Purchaser ). Though the Motion is detailed, and the exhibits thereto are lengthy, the Motion does not provide sufficient information to Ricoh and other creditors, litigation defendants, and contract counterparties to determine whether their rights are being adversely impacted by Kodak s sale (the Sale ). The Motion also suffers from procedural flaws that unfairly prejudice parties to the extent that Kodak seeks to assume and assign purported executory contracts. CLARIFICATIONS In advance of the objection deadline, counsel for Ricoh contacted Kodak s attorneys to clarify whether the transactions subject to the Motion did in fact impact Ricoh. Kodak s counsel informally confirmed the following (the Kodak Confirmations ), and, as long as any order approving the Motion is consistent with the Kodak Confirmation, Ricoh does not object to the Motion with respect to such Kodak Confirmations: Kodak is not at this time seeking to assume, or assume and assign to the Purchaser, any purported executory contracts between Kodak and Ricoh. This includes Contract file number DIH0134447 as listed on Schedule 1.1(x) of Exhibit C to the Motion. Notwithstanding Bankruptcy Code section 363(f), by virtue of the Permitted Patent Encumbrances, to the extent that Kodak assigns patents to the Purchaser that are the subject of agreements between Kodak and Ricoh, the Purchaser will take assignment of such patents subject any rights granted to Ricoh. In the event 2
Pg 6 of 18 that Kodak rejects any purported executory contracts with Ricoh, Ricoh will have the benefit of rights granted under Bankruptcy Code section 365(n). Notwithstanding section 2.1 of the Purchase Agreement, Kodak is not seeking to transfer the Kodak Lawsuit to the Purchaser, but will retain the litigation against Ricoh. Thus, Ricoh s secured setoff claim should be unaffected by the sale. FACTUAL BACKGROUND A. Ricoh s and Kodak s Prepetition Relationship On May 1, 2002, Kodak and Ricoh entered into the Kodak PLA, which was a ten-year patent cross-license agreement covering patents relating to digital camera technology. The agreement was twice amended on July 12, 2006 and December 5, 2007. The Kodak PLA expired by its terms on April 30, 2012. Kodak has listed the Kodak PLA as a Scheduled Patent License Agreement on Schedule 1.1(x) of the Sale Agreement. On October 1, 2011, Ricoh acquired Japanese camera manufacturer and seller of digital cameras, Pentax Imaging Systems ( Pentax Imaging ). Several months after the Pentax Imaging acquisition, Kodak demanded that Ricoh pay ten years worth of patent royalties pursuant to the Kodak PLA s After Acquired Business clause, despite never having made such a request from Pentax Imaging previously. Ricoh refused to meet Kodak s royalty demands, as Ricoh does not interpret the After-Acquired Business clause to require the payment of royalties to Kodak under these circumstances. On April 19, 2012, following Ricoh s refusal to meet Kodak s royalty payment demands, Kodak filed the Kodak Lawsuit, which is a breach of contract and declaratory judgment action against Ricoh in the United States District Court for the Southern District of New York, styled Eastman Kodak Co. v. Ricoh Co., Ltd., No. 12 Civ. 3109 (DLC). The Kodak Lawsuit alleges 3
Pg 7 of 18 that the Kodak PLA requires Ricoh to make royalty payments to Kodak resulting from Ricoh s acquisition of Pentax Imaging, a company that did not have a patent license with Kodak. Ricoh filed its answer on June 25, 2012, pleading, amongst other defenses, that Pentax Imaging had an implied license and/or authorization to sell from Kodak arising out of Kodak s statements to Pentax Imaging, Kodak s business dealings with Pentax prior to Ricoh s purchase of Pentax Imaging, and Kodak s failure to assert its patents against Pentax Imaging. The Kodak Lawsuit is ongoing, and the District Court recently ordered the parties to participate in mediation (which mediation includes consideration of the Prepetition Claims and the Postpetition Claims). B. Ricoh s Prepetition Claims Ricoh holds several patents concerning printing and imaging technology (the Ricoh Patents ). Prior to the Petition Date, Kodak infringed seven of the Ricoh Patents by manufacturing, using, importing, selling, and offering to sell inventory (including printers, print heads, commercial presses, ink and ink cartridges, toner and toner bottles, and associated software) that infringe the Ricoh Patents. On July 17, 2012, Ricoh filed two proofs of claim against Kodak (the Proofs of Claim ). The Proofs of Claim preserve Ricoh s rights to setoff or recoup any damages owing to Kodak arising from the Kodak Lawsuit against the claims asserted in the Proofs of Claim. Ricoh Company, Ltd. filed a Proof of Claim stemming from Kodak s prepetition infringement of seven United States patents. Two of these patents, U.S. Patent Nos. 6,209,048 B1 and 6,256,662 B1, are co-owned by Ricoh Americas Corporation and are also the subject of Ricoh Americas Corporation s Proof of Claim described below. The Proof of Claim also alleges that: (1) Kodak s Black Ink Cartridge 10B, the ink contained therein, the Kodak 10 Series Printhead, and the Office Hero 6.1 All-in-One Printer infringe Ricoh s U.S. Patent No. 6,231,652 B1, (2) Kodak s Office Hero 6.1 All-in-One Printer and associated software infringe Ricoh s U.S. Patent No. 7,344,326, (3) Kodak s Office Hero 6.1 All-in-One Printer and associated software infringe Ricoh s U.S. Patent No. 7,508,533 B2, (4) Kodak s Office Hero 6.1 All-in-One Printer and associated software infringe Ricoh s U.S. Patent No. 7,508,533 B2, (5) Kodak s Office 4
Pg 8 of 18 Hero 6.1 All-in-One Printer and associated software infringe Ricoh s U.S. Patent No. 7,712,989 B2, and (6) Kodak s Office Hero 6.1 All-in-One Printer and associated software infringe Ricoh s U.S. Patent No. 7,719,702 B2. Ricoh Americas Corporation filed a Proof of Claim stemming from Kodak s prepetition infringement of two U.S. patents co-owned by Ricoh Americas Corporation and Ricoh Company Ltd. The Proof of Claim alleges that: (1) Kodak s Office Hero 6.1 All-in-One Printer and all associated software infringe Ricoh s U.S. Patent No. 6,209,048 B1, and (2) Kodak s Office Hero 9.1 All-in- One Printer and all associated software infringes Ricoh s U.S. Patent No. 6,256,662 B1. 2 C. Ricoh s Postpetition Claim Adversary Proceeding On April 18, 2013, Ricoh commenced the Postpetition Claim Adversary Proceeding, which is an adversary proceeding in this Court, Adv. Pro. No. 13-01332-ALG. Through the Postpetition Claim Adversary Proceeding, Ricoh seeks to recover postpetition damages and injunctive and declaratory relief for Kodak s ongoing post-petition infringement of certain printing technologies which are the subject of eight U.S. patents held by Ricoh; those eight patents include the seven patents that are the subject of Ricoh s Proofs of Claim and an additional patent, U.S. Patent No. 7,169,522. Ricoh alleges that at least 29 Kodak products infringe its United States patents (the Infringing Inventory ). 3 The parties recently stipulated to 2 The Proofs of Claim were filed without limitation and nothing contained herein shall constitute a waiver of any claims or rights asserted in, or related to, the Proofs of Claim. 3 The infringing products include, but are not limited to: (1) Kodak black ink cartridge 10B and the ink contained therein, (2) Kodak 10 series print head, (3) Kodak black ink cartridges 30 and 30X and the ink contained therein, (4) Kodak 30 series print head, (5) Kodak Easyshare 5100, (6) Kodak Easyshare 5300, (7) Kodak Easyshare 5500, (8) Kodak ESP 3 All-in-One Printer, (9) Kodak ESP 3250 All-in-One Printer, (10) Kodak ESP 5 All-in-One Printer, (11) Kodak ESP 5250 All-in-One Printer, (12) Kodak ESP 7 All-in-One Printer, (13) Kodak ESP 7250 All-in-One Printer, (14) Kodak ESP 9 All-in-One Printer, (15) Kodak ESP 9250 All-in-One Printer, (16) Kodak ESP C310 All-in-One Printer, (17) Kodak ESP C315 All-in-One Printer, (17) Kodak ESP Office 2150 All-in-One Printer, (18) Kodak ESP Office 2170 All-in-One Printer, (19) Kodak ESP Office 6150 All-in-One Printer, (20) Kodak Office Hero 3.1 All-in-One Printer, (21) Kodak Office Hero 5.1 All-in-One Printer, (22) Kodak Office Hero 6.1 All-in-One Printer, (23) Kodak Office Hero 7.1 All-in-One Printer, (24) the Kodak Office Hero 9.1 All-in-One Printer, Kodak (continued on next page) 5
Pg 9 of 18 a stay of the Postpetition Claim Adversary Proceeding, to expire upon the earlier of September 30, 2013 or 45 days following entry of a confirmation order. ARGUMENT Ricoh does not object to the substance of the Motion the settlement with KPP and the U.K. Subsidiary Parties pursuant to the terms of the Settlement Agreement and the economic terms of the Purchase Agreement. However, because certain aspects of the relief sought in the Motion improperly impair Ricoh s rights, Ricoh believes the relief sought must be either denied or altered, as set forth below. The primary concern Ricoh has is preserving its rights under applicable patent law. Under applicable federal patent law, each time Kodak manufactures, uses, imports, sells, or offers to sell products that infringe Ricoh s patents, Ricoh is entitled to recover damages. Moreover, under applicable federal patent law, if Kodak transfers products to the Purchaser that infringe Ricoh s patents, including the Infringing Inventory, that transfer itself gives rise to liability, and each time thereafter the Purchaser manufactures, uses, imports, sells, or offers to sell products that infringe Ricoh s patents, Ricoh is entitled to recover damages against the Purchaser. A. Any Order Approving the Motion Must Expressly Provide That Kodak Is Obligated to Preserve Documents and Information That Is Discoverable in Connection With the Kodak Lawsuit, the Prepetition Claims, and the Postpetition Claim Adversary Proceeding Because litigation between Ricoh and Kodak is ongoing, including the Kodak Lawsuit and the Postpetition Claim Adversary Proceeding, Kodak is obligated to ensure that information and evidence relevant to such pending litigation remains available to the litigants. See, e.g., ESP 5210 All-in-One Printer, (25) Kodak ESP 3.2 All-in-One Printer, (26) Kodak NexPress HD Dry Ink (magenta), (27) Kodak NexPress Dry Ink (black, magenta), (28) NexPress HD Dry Ink and NexPress Dry Ink toner bottles, and (29) Kodak NexPress 2100, 2100 Plus, 2500 S-Series, SE-Series, SX-Series and Photo Digital Color Presses. 6
Pg 10 of 18 Fujitsu Ltd. v. Fed. Exp. Corp., 247 F.3d 423, 436 (2d Cir. 2001) ( The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation ). According to the Kodak Confirmations that Kodak s counsel provided, Kodak is not transferring to the Purchaser any claims Kodak asserts against Ricoh. But the Motion is unclear whether property being transferred to the Purchaser includes documents and information that would be discoverable by Ricoh in connection with such pending litigation. Moreover, section 5.16 of the Purchase Agreement appears to allow the Purchaser to destroy records within a short period of time, and it is uncertain whether some of the records would be records that are discoverable in the litigation between Kodak and Ricoh. See Purchase Agreement at 5.16. 4 All documents and information that Ricoh could discover in connection with the Kodak Lawsuit, the Prepetition Claims, and the Postpetition Claim Adversary Proceeding must be preserved. Kodak could not avoid these preservation duties outside of bankruptcy and should not be permitted to do so through the Sale. Any order granting the Motion should provide that, notwithstanding transfer of property to the Purchaser, Kodak will preserve any documents and information that is discoverable in the litigation between Kodak and Ricoh. B. The Sale Cannot Relieve the Purchaser From Post-Sale Liability Associated With Infringing Inventory Pursuant to the Purchase Agreement, Kodak will transfer to the Purchaser all of Kodak s Owned Inventory free and clear of liens, claims and interests. The items included in the Owned Inventory are not identified in the publicly available Purchase Agreement. Not 4 Section 5.16 of the Purchase Agreement obligates the Purchaser to preserve for seven years all pre-closing Date records, but proviso (x) states that, notwithstanding section 5.16, the Purchaser may destroy records on thirty days notice to Kodak. 7
Pg 11 of 18 surprisingly, Ricoh is concerned that Owned Inventory includes property, including the Infringing Inventory, that infringes Ricoh s patents. The transfer to the Purchaser potentially gives rise to patent infringement claims against the Purchaser. Under applicable patent law, the Purchaser is liable if it manufactures, uses, imports, sells, or offers to sell the Infringing Inventory. 5 See 35 U.S.C. 271(a). To the extent that Kodak and the Purchaser take the position that sale of Owned Inventory would permit the Purchaser to manufacture, use, import, sell, or offer to sell the Infringing Inventory free and clear of Ricoh s patent rights, such sale would, without justification, deny Ricoh its statutory right to exclude others from the use of its patent. See 35 U.S.C. 154. Bankruptcy Code section 363(f) s free and clear provision does not include a free pass to the Purchaser to infringe Ricoh s patents for post-sale conduct that gives rise to liability under applicable patent law, notwithstanding the fact that the Purchaser acquired the Infringing Inventory pursuant to an order under Bankruptcy Code section 363(f). Consistent with Bankruptcy Code section 363(e), 6 Ricoh objects to the Sale Motion to the extent Kodak seeks to sell the Owned Inventory free and clear of Ricoh s rights, claims, and interests in the Infringing Inventory, and requests that the Motion and Purchase Agreement be amended to preserve, without limitation, Ricoh s rights to: (1) pursue Postpetition Claims against Kodak arising out of Kodak s sale of the Infringing Inventory; and (2) pursue claims 5 In the event the Owned Inventory includes the Infringing Inventory, Kodak s sale and transfer of the Owned Inventory to the Purchaser gives rise to additional patent infringement claims against Kodak that would increase the amount of the Postpetition Claims. See 35 U.S.C. 271(a). 6 Bankruptcy Code section 363(e) provides that on request of an entity that has an interest in property that is proposed to be sold, a court shall prohibit or condition such sale as is necessary to provide adequate protection of such interest. See 11 U.S.C. 363(e). 8
Pg 12 of 18 against the Purchaser for the purchase and any subsequent activity related to the Infringing Inventory. C. Ricoh Preserves any and all of Its Rights to Object to Attempted Assumption/Assignment of the Kodak PLA One of the Kodak Confirmations provided to Ricoh is that Kodak does not currently intend to assume and assign the Kodak PLA to the Purchaser. Nevertheless, Ricoh reserves its right to object to assumption and assignment of the Kodak PLA on any and all grounds, including: the contention that the Kodak PLA is not an executory contract; rights granted to Ricoh under section 365(c) of the Bankruptcy Code; the failure to provide adequate assurance of future performance; the inability of a putative assignee to perform under the Kodak PLA; and/or the identity of a putative assignee. Accordingly, Ricoh requests that any order approving the Motion expressly provide what Kodak s counsel informally confirmed as one of the Kodak Confirmations, namely that Kodak is not at this time seeking to assume, or assume and assign to the Purchaser, any purported executory contracts between Kodak and Ricoh, including Contract file number DIH0134447 as listed on Schedule 1.1(x) of Exhibit C to the Motion. Further, notwithstanding Bankruptcy Code section 363(f), by virtue of the Permitted Patent Encumbrances, to the extent that Kodak assigns patents to the Purchaser that are the subject of agreements between Kodak and Ricoh, the Purchaser will take assignment of such patents subject any rights granted to Ricoh. In the event that Kodak rejects any purported executory contracts with Ricoh, Ricoh will have the benefit of rights granted under Bankruptcy Code section 365(n). D. The Procedures Proposed in the Motion and the Lack of Information Included in the Motion Significantly Impair Ricoh s Ability to Protect Its Rights 9
Pg 13 of 18 The Motion proposes certain flawed procedures for the assumption or assumption and assignment of executory contracts (the Assignment Procedures ) that significantly undermine Ricoh s ability to protect its rights in the event that Kodak does seek to assume and assign the Kodak PLA. As an initial matter, the Motion asks this Court to require Ricoh to state its objection to any proposed assumption of the Kodak PLA with specificity. 7 Motion at 32. But the Motion does not provide Ricoh with enough information to permit it to satisfy Kodak s requirement. The Motion, which attaches the Purchase Agreement in redacted form, does not disclose which licenses Kodak wishes to assume or which interests or rights may be affected by the Sale. Likewise, though the Motion notes that contracts may be deemed to be, among other things, Shared Contracts and Assumed Contracts, neither it nor any of its redacted exhibits establish which contracts may, at some point, be characterized as either a Shared Contract or an Assigned Contract. Moreover, although the Motion references designees in connection with KPP, it fails to explain whether such designees would be third party, as-yet unidentified, purchasers including purchasers whose competitive position may harm Ricoh s market share or position. The Motion also does not indicate whether KPP or any of its designees will be permitted, upon assumption and assignment, to further transfer or assign the Kodak PLA or how KPP a pension plan can perform under the Kodak PLA (and agreements with other, similarly situated parties). 7 Notably, the Motion fails to establish who will determine whether an objection is satisfactory, how an objection is determined to be satisfactory, or even whether the Resolution Procedures will apply if an objection is not satisfactory. This is yet another informational deficit that warrants modifying the Assignment Procedures outlined in the Motion. 10
Pg 14 of 18 Further, the Motion does not explain with any specificity what constitutes adequate assurance of future performance as it relates to the Kodak PLA. The Motion s broad proclamation that KPP s financial credibility and willingness to perform constitute adequate assurance, see Motion at 65, is plainly insufficient under the plain language of section 365. See, e.g., 11 U.S.C. 365(b)(1)(C) & (f)(2)(b); In re Nat l Shoes, Inc., 20 B.R. 55, 59 (Bankr. S.D.N.Y. 1982); In re Great Atl. & Pac. Tea Co., Inc., 472 B.R. 666, 675 (S.D.N.Y. 2012) ( What constitutes adequate assurance is a factual question to be determined on a case by case basis with due regard to the nature of the parties, their past dealings and present commercial realities ); In re Fleming Companies, Inc., 499 F.3d 300, 305 (3d Cir. 2007) (stating that a bankruptcy court... must be sensitive to the rights of the non-debtor contracting party... and the policy requiring that the non-debtor receive the full benefit of his or her bargain ). Because the Motion does not provide Ricoh with enough information to permit it to evaluate the consequences of the Sale or to satisfy the Motion s requirement of objecting to assumption of the Kodak PLA with particularity, it must be modified. In any event, even if the Motion did provide Ricoh with adequate information (and it does not), it must be rejected or modified because it does not allow Ricoh sufficient time. The Motion states that, to assume a contract, Kodak will provide contract counterparties with notice of intent to assume and that such notice need only be given 20 days before an assumption hearing is held, leaving objecting parties with even less time to object to assumption. Motion at 32. This minimal allotment of time, when combined with the Motion s significant informational deficits, does not afford Ricoh sufficient time to evaluate any impact resulting from the sale to the Purchaser and, to the extent necessary, object to assumption of the Kodak PLA. 11
Pg 15 of 18 The Motion is also flawed because, as noted above, it incorporates a concept that Kodak has titled Shared Contracts. Under this concept, Kodak appears to be attempting to reject certain obligations pursuant to contracts that are deemed to be Shared while simultaneously enjoying the benefits of such contracts. Because this process is wholly objectionable and contrary to basic legal principles governing assumption of contracts, see, e.g., In re MF Global Holdings, Ltd., 466 B.R. 239, 241 (Bankr. S.D.N.Y. 2012) ( An executory contract may not be assumed in part and rejected in part ), this process must be modified to make clear that any attempted assumption of the Kodak PLA (to the extent it is even capable of assumption) requires Kodak to assume the entirety of the contract. Additionally, the Motion fails to include certain counterparty protective language that various parties had previously negotiated with Kodak. This language was incorporated into paragraph 31(b) in a previous sale order titled Order Authorizing (A) The Sale Of Patent Assets Free And Clear Of Claims And Interests, (B) The License of Patents, (C) The Assumption of Patent Cross License Agreements With Fujifilm And (D) The Settlement Of Claims Related To Certain Patents (the Order ), Bankr. No. 12-10202 [Dkt. No. 2847]. Order at 31(b). The Motion is objectionable without this language, which read in pertinent part: Nothing in this Order or in the Sale Agreement (including, without limitation, Section 2.2 thereof) (in each case, other than the last line of this clause (b)) shall have any collateral estoppel, res judicata, waiver or other adverse effect in connection with, nor shall be deemed to be an assumption, assignment or rejection of any agreement listed on Schedule 1.1(d) or 1.1(h) of the Sale Agreement. To the extent the Debtors seek to assume, assign or reject any agreement listed on Schedule 1.1(d) or 1.1(h) of the Sale Agreement, nothing in this Order (other than the last line of this clause (b)) shall impair, prejudice, waive or otherwise affect any party s rights with respect to such proposed assumption, assignment or rejection thereof (including under 365(n) of the Bankruptcy Code). Incorporating this language, or language that is identical in substance, into the Motion and Proposed Order is necessary to protect Ricoh s rights. 12
Pg 16 of 18 Finally, the Assignment Procedures proposed in the Motion attempt to override the antiassignment provisions in the Kodak PLA. This is contrary to the plain terms of Bankruptcy Code section 365(c)(1), which prohibits assignment if applicable law excuses a party... from accepting performance from or rendering performance to an entity other than the debtor or the debtor in possession. The case law does not support the Motion s position. In fact, courts have recognized that patent license agreements are not assignable, even without regard to antiassignment provisions. See, e.g., In re Patient Education Media, Inc., 210 B.R. 237, 242 (Bankr. S.D.N.Y. 1999) (stating, in the context of copyright law law that courts recognize implicates similar policy concerns as patent law [t]he federal policy designed to protect the limited monopoly of copyright owners and restrict unauthorized use... prevents the trustee from assigning the nonexclusive license absent the owner s consent ); In re CLFC, Inc., 89 F.3d 673, 679 (9th Cir. 1996) (stating, in the context of determining whether a patent license could be assigned without the counterparty s consent, that [i]t is well settled that a non-exclusive licensee of a patent has only a personal and not a property interest in the patent and that this personal right cannot be assigned unless the patent owner authorizes the assignment or the license itself permits assignment ); Perlman v. Catapult Entm t, Inc. (In re Catapult Entm t, Inc.), 165 F.3d 747 (9th Cir. 1999)(holding that a party cannot assume a patent agreement over the counterparty s objection). Section 365(c)(1) and policy concerns establish, that patent licenses cannot be assigned over a counterparty s objection. Kodak cites no relevant authority for the broad proposition included in the Motion and this objectionable proposal should be rejected. 13
Pg 17 of 18 CONCLUSION For the foregoing reasons, Ricoh respectfully requests, through its undersigned attorneys, that the Motion be modified in the manner described herein to: (1) ensure that Kodak honors its obligations relating to the pending litigation between Ricoh and Kodak; (2) confirm that any transfer of assets to the Purchaser does not provide the Purchaser a free and clear opportunity after Closing to manufacture, use, import, sell, or offer to sell any property, including the Infringing Inventory, that infringes Ricoh s patents; (3) include more information concerning the effect of the sale, in the ways detailed herein; (4) expand Ricoh s time to respond to a notice of assumption; and (5) reject Kodak s assertion that it is entitled to strike anti-assignment procedures as a general proposition. Further, Ricoh hereby preserves any and all rights to object on any and all grounds stated herein or, to the extent necessary, on other grounds. Dated: June 13, 2013 New York, NY QUINN EMANUEL URQUHART & SULLIVAN, LLP /s/ Eric Winston Xochitl S. Strohbehn 51 Madison Avenue, 22nd Floor New York, NY 10010 Tel: (212) 849-7000 Fax: (212) 849-7100 Email: xochitlstrohbehn@quinnemanuel.com Eric Winston (admitted pro hac vice) Rachel Appleton 865 South Figueroa, 10th Floor Los Angeles, CA 90017 Tel: (213) 443-3000 Fax: (213) 443-3100 Email: ericwinston@quinnemanuel.com rachelappleton@quinnemanuel.com 14
Pg 18 of 18 David Eiseman (admitted pro hac vice) 1299 Pennsylvania Ave. NW, Suite 825 Washington, DC 20004 Tel: (202) 538-8000 Fax: (202) 538-8100 Email: davideiseman@quinnemanuel.com Co-Counsel for Creditors Ricoh Company, Ltd. and Ricoh Americas Corporation 15