United States Court of Appeals For The Fourth Circuit

RECORD NO. 12-1802 In The United States Court of Appeals For The Fourth Circuit DR. MICHAEL JAFFÉ, As Insolvency Administrator Over the Estate of Qimonda AG, i.in., Plaintiff Appellant, v. SAMSUNG ELECTRONICS COMPANY, LIMITED; INFINEON TECHNOLOGIES AG; INTERNATIONAL BUSINESS MACHINES CORPORATION; SK HYNIX INC.; INTEL CORPORATION; NANYA TECHNOLOGY CORPORATION; MICRON TECHNOLOGY, Defendants Appellees. ON APPEAL FROM THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA AT ALEXANDRIA PAGE PROOF BRIEF OF APPELLEES William H. Pratt Timothy Muris William E. Devitt Jennifer M. Selendy Daniel A. Bress Dennis J. Abdelnour John P. Del Monaco KIRKLAND & ELLIS LLP KIRKLAND & ELLIS LLP KIRKLAND & ELLIS LLP 655 Fifteenth Street, N.W. 300 North LaSalle 601 Lexington Avenue Washington, DC 20005 Chicago, Illinois 60654 New York, New York 10022 (202) 879-5000 (312) 862-2000 (212) 466-4800 Counsel for Appellees Counsel for Appellees Counsel for Appellees Samsung Electronics Co., Ltd., Samsung Electronics Co., Ltd., Samsung Electronics Co., Ltd., Infineon Technologies AG, and Infineon Technologies AG, and Infineon Technologies AG, and IBM Corporation IBM Corporation IBM Corporation

RECORD NO. 12-1802 Stephen E. Leach Lawrence A. Katz Theodore G. Brown, III LEACH TRAVELL BRITT, P.C. LEACH TRAVELL BRITT, P.C. KILPATRICK TOWNSEND 8270 Greensboro Drive, Suite 700 8270 Greensboro Drive, Suite 700 & STOCKTON LLP Tysons Corner, Virginia 22102 Tysons Corner, Virginia 22102 1080 Marsh Road (703) 584-8902 (703) 584-8362 Menlo Park, California 94025 (650) 324-6353 Counsel for Appellees Counsel for Appellee Counsel for Appellee Infineon Technologies AG, SK hynix Inc. SK hynix Inc. Samsung Electronics Co., Ltd. and IBM Corporation Joseph E. Mais John K. Roche Alan D. Smith Timothy J. Franks PERKINS COIE LLP PERKINS COIE LLP PERKINS COIE LLP 700 Thirteenth Street N.W. 1201 Third Avenue, Suite 4800 2901 N. Central Avenue, Suite 2000 Washington, DC 20005 Seattle, Washington 98101 Phoenix, Arizona 85012 (202) 434-1627 (206) 359-8000 (602) 351-8000 Counsel for Appellee Counsel for Appellee Counsel for Appellee Intel Corporation Intel Corporation Intel Corporation Marc Palay Jonathan Cohn Maurice Horwitz SIDLEY & AUSTIN LLP SIDLEY AUSTIN LLP WEIL, GOTSHAL & MANGES LLP Rue de Lausanne 139 Sixth Floor 1501 K Street, N.W. 767 Fifth Avenue 1201 Geneva Washington, DC 20005 New York, New York 10153 41.22.308.00.00 (202) 736-8041 (212) 310-8000 Counsel for Appellee Counsel for Appellee Counsel for Appellee Nanya Technology Corp. Nanya Technology Corp. Micron Technology, Inc. M. Jarrad Wright Alfredo R. Perez Jared Bobrow Adam P. Strochak WEIL, GOTSHAL & MANGES LLP WEIL, GOTSHAL & MANGES LLP WEIL, GOTSHAL & MANGES LLP 700 Louisiana Street, Suite 1600 201 Redwood Shores Parkway 1300 Eye Street, NW, Suite 900 Houston, Texas 77002 Redwood Shores, California 94065 Washington, DC 20005 (713) 546-5000 (650) 802-3000 (202) 682-7000 Counsel for Appellee Counsel for Appellee Counsel for Appellee Micron Technology, Inc. Micron Technology, Inc. Micron Technology, Inc. THE LEX GROUP 1108 East Main Street Suite 1400 Richmond, VA 23219 (804) 644-4419 (800) 856-4419 Fax: (804) 644-3660 www.thelexgroup.com

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case, except that a disclosure statement is not required from the United States, from an indigent party, or from a state or local government in a pro se case. In mandamus cases arising from a civil or bankruptcy action, all parties to the action in the district court are considered parties to the mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. If counsel is not a registered ECF filer and does not intend to file documents other than the required disclosure statement, counsel may file the disclosure statement in paper rather than electronic form. Counsel has a continuing duty to update this information. No. 12-1802 Caption: Dr. Michael Jaffe v. Samsung Electronics Company, et al. Pursuant to FRAP 26.1 and Local Rule 26.1, Samsung Electronics Co., Ltd. (name of party/amicus) who is, appellee makes the following disclosure: (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: - 1 -

4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: Infineon Technologies AG, International Business Machines Corp., Hynix Semiconductor, Inc., Intel Corporation, Nanya Technology Corporation, and Micron Technology, Inc. (Appellees) 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors committee: Dr. Michael Jaffee, as Insolvency Administrator over the Estate of Qimonda AG Signature: /s/ John Del Monaco Date: November 13, 2012 Counsel for: Samsung Electronics Co., Ltd. CERTIFICATE OF SERVICE ************************** I certify that on November 13, 2012 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: /s/ John Del Monaco November 13, 2012 (signature) (date) 07/19/2012-2 - SCC

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case, except that a disclosure statement is not required from the United States, from an indigent party, or from a state or local government in a pro se case. In mandamus cases arising from a civil or bankruptcy action, all parties to the action in the district court are considered parties to the mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. If counsel is not a registered ECF filer and does not intend to file documents other than the required disclosure statement, counsel may file the disclosure statement in paper rather than electronic form. Counsel has a continuing duty to update this information. No. 12-1802 Caption: Dr. Michael Jaffe v. Samsung Electronics Company, et al. Pursuant to FRAP 26.1 and Local Rule 26.1, Infineon Technologies AG (name of party/amicus) who is, appellee makes the following disclosure: (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: - 1 -

4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: International Business Machines Corporation, Samsung Electronics Co., Ltd., Hynix Semiconductor, Inc., Intel Corporation, Nanya Technology Corporation, and Micron Technology, Inc. (Appellees) 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors committee: Dr. Michael Jaffee, as Insolvency Administrator over the Estate of Qimonda AG Signature: /s/ John Del Monaco Date: November 13, 2012 Counsel for: Infineon Technologies AG CERTIFICATE OF SERVICE ************************** I certify that on November 13, 2012 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: /s/ John Del Monaco November 13, 2012 (signature) (date) 07/19/2012-2 - SCC

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case, except that a disclosure statement is not required from the United States, from an indigent party, or from a state or local government in a pro se case. In mandamus cases arising from a civil or bankruptcy action, all parties to the action in the district court are considered parties to the mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. If counsel is not a registered ECF filer and does not intend to file documents other than the required disclosure statement, counsel may file the disclosure statement in paper rather than electronic form. Counsel has a continuing duty to update this information. No. 12-1802 Caption: Dr. Michael Jaffe v. Samsung Electronics Company, et al. Pursuant to FRAP 26.1 and Local Rule 26.1, International Business Machines Corporation (name of party/amicus) who is, Appellee makes the following disclosure: (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: - 1 -

4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: Infineon Technologies AG, Samsung Electronics Co., Ltd., Hynix Semiconductor, Inc., Intel Corporation, Nanya Technology Corporation, and Micron Technology, Inc. (Appellees) 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors committee: Dr. Michael Jaffe, as Insolvency Administrator over the Estate of Qimonda AG. Signature: /s/ John Del Monaco Date: November 13, 2012 Counsel for: International Business Machines CERTIFICATE OF SERVICE ************************** I certify that on November 13, 2012 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: /s/ John Del Monaco November 13, 2012 (signature) (date) 07/19/2012-2 - SCC

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case, except that a disclosure statement is not required from the United States, from an indigent party, or from a state or local government in a pro se case. In mandamus cases arising from a civil or bankruptcy action, all parties to the action in the district court are considered parties to the mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. If counsel is not a registered ECF filer and does not intend to file documents other than the required disclosure statement, counsel may file the disclosure statement in paper rather than electronic form. Counsel has a continuing duty to update this information. No. 12-1802 Caption: Dr. Michael Jaffe v. Samsung Electronics Co., Ltd., et al. Pursuant to FRAP 26.1 and Local Rule 26.1, SK hynix Inc., f/k/a Hynix Semiconductor Inc. (name of party/amicus) who is, appellee makes the following disclosure: (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: SK Telecom Co., Ltd 11, Euljiro, 2-ga, Jung-gu Seoul 100-999, Korea - 1 -

4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors committee: No creditors' committee or trustee has been appointed. Dr. Michael Jaffe (the appellant) serves as the Insolvency Administrator in the Debtor's foreign bankruptcy proceeding. Signature: /s/ Theodore G. Brown, III Date: November 13, 2012 Counsel for: SK hynix Inc., f/k/a Hynix Semi. Inc. CERTIFICATE OF SERVICE ************************** I certify that on November 13, 2012 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: /s/ Theodore G. Brown, III November 13, 2012 (signature) (date) 07/19/2012-2 - SCC

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case, except that a disclosure statement is not required from the United States, from an indigent party, or from a state or local government in a pro se case. In mandamus cases arising from a civil or bankruptcy action, all parties to the action in the district court are considered parties to the mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. If counsel is not a registered ECF filer and does not intend to file documents other than the required disclosure statement, counsel may file the disclosure statement in paper rather than electronic form. Counsel has a continuing duty to update this information. No. 12-1802 Caption: Dr. Michael Jaffe v. Samsung Electronics Company, et al. Pursuant to FRAP 26.1 and Local Rule 26.1, Intel Corporation (name of party/amicus) who is, Respondent makes the following disclosure: (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: - 1 -

4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: Intel Corporation may have indemnity rights against Infineon Technologies, AG, another Respondent in this proceeding. 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors committee: Not applicable, as this matter arises out of a petition for recognition of a German insolvency proceeding under Chapter 15 of the Bankruptcy Code. Signature: /s/ John K. Roche Date: November 13, 2012 Counsel for: Intel Corporation CERTIFICATE OF SERVICE ************************** I certify that on November 13, 2012 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: /s/ John K. Roche November 13, 2012 (signature) (date) 07/19/2012-2 - SCC

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case, except that a disclosure statement is not required from the United States, from an indigent party, or from a state or local government in a pro se case. In mandamus cases arising from a civil or bankruptcy action, all parties to the action in the district court are considered parties to the mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. If counsel is not a registered ECF filer and does not intend to file documents other than the required disclosure statement, counsel may file the disclosure statement in paper rather than electronic form. Counsel has a continuing duty to update this information. No. 12-1802 Caption: Dr. Michael Jaffe v. Samsung Electronics Company, et al. Pursuant to FRAP 26.1 and Local Rule 26.1, Nanya Technology Corporation (name of party/amicus) who is, appellee makes the following disclosure: (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: Formosa Plastics Group. The following members of the Formosa Plastics Group are significant shareholders of Nanya Technology Corp. and are publicly held companies: Formosa Plastics Corp., Nan Ya Plastics Corp., Formosa Chemicals & Fibre Corp., and Formosa Petrochemical Corp. 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: Nan Ya Plastics Corp. Formosa Plastics Corp. Formosa Chemicals & Fibre Corp. Formosa Petrochemical Corp. - 1 -

4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors committee: No creditors' committee or trustee has been appointed. Dr. Michael Jaffe (the appellant) serves as the insolvency Administrator in the Debtor's foreign bankruptcy proceeding. Signature: /s Marc Palay Date: November 13, 2012 Counsel for: Nanya Technology Corporation CERTIFICATE OF SERVICE ************************** I certify that on November 13, 2012 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: /s/ Marc Palay November 13, 2012 (signature) (date) 07/19/2012-2 - SCC

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case, except that a disclosure statement is not required from the United States, from an indigent party, or from a state or local government in a pro se case. In mandamus cases arising from a civil or bankruptcy action, all parties to the action in the district court are considered parties to the mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. If counsel is not a registered ECF filer and does not intend to file documents other than the required disclosure statement, counsel may file the disclosure statement in paper rather than electronic form. Counsel has a continuing duty to update this information. No. 12-1802 Caption: Dr. Michael Jaffe v. Samsung Electronics Company, et al. Pursuant to FRAP 26.1 and Local Rule 26.1, Micron Technology, Inc. (name of party/amicus) who is, appellee makes the following disclosure: (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: FMR LLC - 1 -

4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors committee: No creditors' committee or trustee has been appointed. Dr. Michael Jaffe (the appellant) serves as the Insolvency Administrator in the Debtor's foreign bankruptcy proceeding. Signature: /s/ M. Jarrad Wright Date: November 13, 2012 Counsel for: Micron Technology, Inc. CERTIFICATE OF SERVICE ************************** I certify that on November 13, 2012 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: /s/ M. Jarrad Wright November 13, 2012 (signature) (date) 07/19/2012-2 - SCC

TABLE OF CONTENTS Page JURISDICTIONAL STATEMENT... 1 PRELIMINARY STATEMENT... 2 STATEMENT OF THE ISSUES... 7 STATEMENT OF THE CASE... 8 STATEMENT OF FACTS... 10 A. Qimonda s Creation and Bankruptcy... 10 B. The Initial Proceedings Before the Bankruptcy Court and the Appeal to the District Court... 11 1. Dr. Jaffé s Request for Chapter 15 Protection in U.S. Bankruptcy Court... 11 2. The District Court s Reversal and Remand... 12 C. The Evidentiary Hearing on Remand and the Bankruptcy Court s Denial of Dr. Jaffé s Motion to Remove 365(n) from the Supplemental Order... 14 SUMMARY OF ARGUMENT... 18 STANDARD OF REVIEW... 21 ARGUMENT... 22 I. CHAPTER 15 GIVES BANKRUPTCY COURTS DISCRETION TO CONDITION A GRANT OF RELIEF TO A FOREIGN REPRESENTATIVE ON COMPLIANCE WITH 365(n).... 22 A. Any Challenge to the Applicability of 365(n) Has Been Waived.... 23 i

B. The Government s Challenge to the Applicability of 365(n) Is Based on a Flawed View of the Record, the Governing Statute, and the Nature of U.S. Patents.... 24 C. Dr. Jaffé s Assertion that 365(n) Could Not Be Applied Because He Never Requested Relief Is Factually and Legally Incorrect.... 30 II. THE BANKRUPTCY COURT DID NOT ABUSE ITS DISCRETION WHEN IT REFUSED TO REMOVE 365(n) FROM THE SUPPLEMENTAL ORDER IN ACCORDANCE WITH THE PROTECTIONS OF 1522.... 32 A. The Bankruptcy Court Fully Considered the Interests of Both the Qimonda Estate and the Licensees.... 33 B. The Bankruptcy Court Properly Recognized that Dr. Jaffé s Offer to Relicense Did Not Change the Balance of Harms.... 40 III. THE BANKRUPTCY COURT DID NOT ABUSE ITS DISCRETION WHEN IT DETERMINED THAT REMOVING 365(n) FROM THE SUPPLEMENTAL ORDER WOULD BE CONTRARY TO FUNDAMENTAL U.S. PUBLIC POLICY IN VIOLATION OF 1506.... 45 A. The District Court Identified the Correct Standard Under 1506.... 45 B. Under the Proper 1506 Standard, the Bankruptcy Court s Refusal to Remove 365(n) Was Not an Abuse of Discretion.... 52 1. Section 365(n) Embodies a Fundamental Public Policy of the United States.... 53 2. Removal of 365(n) Protection Would Undermine the Fundamental U.S. Public Policy of Promoting Innovation.... 60 CONCLUSION AND REQUEST FOR ORAL ARGUMENT... 61 ii

CERTIFICATE OF COMPLIANCE... 64 CERTIFICATE OF SERVICE... 65 iii

Cases TABLE OF AUTHORITIES iv Page(s) Amoco Oil Co. v. United States, 234 F.3d 1374 (Fed. Cir. 2000)...24 Bundesarbeitsgericht [Federal Labor Court] Feb. 27, 2007, No. 3 AZR 619/06 (Ger.)...51 Bundesgerichtshof [Federal Court of Justice] June 4, 1992, No. IX ZR 149/9 (Ger.)...51 Bundesgerichtshof [Federal Court of Justice], Apr. 29, 2010, Case No. I ZR 69/08 (Ger.)...56 Bundesgerichtshof [Federal Court of Justice], Mar. 26, 2009, Case No. I ZR 153/06 (Ger.)...55 Evans v. Jordan, 13 U.S. 199 (1815)... 58, 59 In re Ephedra Prods. Liab. Litig., 349 B.R. 333 (S.D.N.Y. 2006)... 47, 48 In re Ernst & Young, Inc., 383 B.R. 773 (Bankr. D. Colo. 2008)...47 In re French, 440 F.3d 145 (4th Cir. 2006)...59 In re Gold & Honey, Ltd., 410 B.R. 357 (Bankr. E.D.N.Y. 2009)... 46, 47, 48, 50 In re Iida, 377 B.R. 243 (B.A.P. 9th Cir. 2007)...47 In re Metcalfe & Mansfield Alt. Invs., 421 B.R. 685 (Bankr. S.D.N.Y. 2010)... 47, 48 In re Morris, 385 B.R. 823 (E.D. Va. 2008)...21 In re Nieves, 648 F.3d 232 (4th Cir. 2011)...21 In re Robbins, 964 F.2d 342 (4th Cir. 1992)...21

In re Sivec SRL, 476 B.R. 310 (Bankr. E.D. Okla. 2012)... 47, 49 In re Toft, 453 B.R. 186 (Bankr. S.D.N.Y. 2011)... 47, 48 In re Tri-Cont l Exch. Ltd., 349 B.R. 627 (Bankr. E.D. Cal. 2006)... 22, 30, 32 In re Vitro, S.A.B. de C.V., 473 B.R. 117 (Bankr. N.D. Tex. 2012)... 47, 48, 51 Landgericht [Regional Court] Mannheim, Feb. 18, 2011, Case No. 7 O 100/10 (Ger.)...55 Landgericht [Regional Court] Munich I, Feb. 9, 2012, Case No. 7 O 1906/11 (Ger.)...55 Landgericht [Regional Court] Munich I, June 13, 2007, Case No. 21 O 23532/06 (Ger.)...55 Lubrizol Enters. Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985)... 53, 57 Marvell Semiconductor v. CSIRO, No. 6:07 Civ. 204 (E.D. Tex., filed May 4, 2007)...43 Microsoft Corp. v. Motorola, Inc., 854 F. Supp. 2d 993 (W.D. Wash. 2012)...43 Nokia Corp. v. Qualcomm Inc., No. 2330-N (D. Del., filed Aug. 9, 2006)...43 Omni Outdoor Adver., Inc. v. Columbia Outdoor Adver., Inc., 974 F.2d 502 (4th Cir. 1992)...24 Parsons & Whittemore Overseas Co. v. Societe Generale De L Industrie Du Papier (RAKTA), 508 F.2d 969 (2d Cir. 1974)... 49, 50 Proxim Inc. v. 3Com Corp., No. 1:01 Civ. 155 (D. Del., filed Mar. 8, 2001)...43 Rubin v. Eurofinance SA, [2012] U.K.S.C. 46 (U.K.)...52 Sunbeam Prods., Inc. v. Chicago Am. Mfg., LLC, 686 F.3d 372 (7th Cir. 2012)...58 v

United States v. Buculei, 262 F.3d 322 (4th Cir. 2001)...24 United States v. Evans, 404 F.3d 227 (4th Cir. 2005)...23 Statutes 11 U.S.C. 1501(a)(2)...27 11 U.S.C. 1501(a)(3)...27 11 U.S.C. 1506... passim 11 U.S.C. 1520... 7 11 U.S.C. 1521... passim 11 U.S.C. 1521(a)... 24, 30 11 U.S.C. 1521(b)... 18, 24, 28, 30 11 U.S.C. 1522... passim 11 U.S.C. 1522(a)... passim 11 U.S.C. 1522(c)... 12, 29, 31 11 U.S.C. 362...24 11 U.S.C. 363... 26, 27, 28 11 U.S.C. 363(e)...28 11 U.S.C. 363(f)...27 11 U.S.C. 365... passim 11 U.S.C. 365(n)... passim 11 U.S.C. 541...55 11 U.S.C. 1519... 28, 29 28 U.S.C. 1334...55 28 U.S.C. 158(d)(2)... 1 35 U.S.C. 1...24 German Insolvency Code 103...11 Legislative Materials H.R. Rep. No. 100-1012(1988)...57 H.R. Rep. No. 109-31 (2005)... 21, 29, 43, 45 vi

S. Rep. No. 100-505 (1988)... 3, 53, 56 Other Authorities and Sources Daniel A. Nolan IV, Comment, A Fundamental Problem: The Vulnerability of Intellectual Property Licenses in Chapter 15 and the Meaning of 1506, 28 Emory Bankr. Dev. J. 177 (2011)...55 Mark A. Lemley, Intellectual Property Rights and Standard-Setting Organizations, 90 Calif. L. Rev. 1889 (2002)...41 Peter S. Menell, Bankruptcy Treatment of Intellectual Property Assets: An Economic Analysis, 22 Berkeley Tech. L.J. 733 (2007)...53 Restatement (Third) of Foreign Relations Law 403 (1987)...58 UNCITRAL Legislative Guide on Insolvency Law... 53, 54 UNCITRAL Model Law on Cross-Border Insolvency and Guide to Enactment... 29, 45, 50 vii

NOTES Unless otherwise indicated, all emphasis appearing in this brief has been added, and all internal citations and quotations omitted. viii

JURISDICTIONAL STATEMENT This Court has jurisdiction under 28 U.S.C. 158(d)(2). Appellees otherwise accept Appellant s jurisdictional statement. 1

PRELIMINARY STATEMENT After a four-day evidentiary hearing, the bankruptcy court below correctly found that preventing Qimonda s foreign representative from terminating the Appellee-Licensees fully paid-up licenses to Qimonda s U.S. patents in conjunction with Qimonda s German bankruptcy proceeding was necessary both to protect those Licensees interests and to ensure that a fundamental public policy of the United States was not violated. The essentially uncontroverted showing at that hearing demonstrated that allowing Dr. Michael Jaffé, Qimonda s foreign representative, to repudiate Qimonda s licenses in bankruptcy would have dire consequences not only for the Licensees but also for the effective operation of the semiconductor industry and other businesses dependent on licensing of intellectual property. The thicket of patents at the heart of the semiconductor industry requires manufacturers to secure numerous licenses to obtain the design freedom needed to develop and to sell innovative new products without risking patent infringement claims and injunctions. If, as Dr. Jaffé contends, foreign representatives could terminate licensees rights, semiconductor manufacturers would not only be subject to hold-up for excessive licensing fees by foreign representatives or subsequent buyers of the formerly licensed patents, they would also face a world of grave uncertainty. They could no longer operate and innovate with the comfort 2

that the licenses at the core of new product development would remain secure. Given the billions of dollars necessary to develop and to manufacture new products in this industry, chilling of research and development would be inevitable. Companies would also be deterred from adopting industry standards, which likewise depend on secure and irrevocable patent licenses. Such considerations motivated Congress to enact 11 U.S.C. 365(n). Section 365(n) was intended to clarify that patent license rights are vital to the United States economy and should continue to be protected from termination in bankruptcy. Congress found that allowing termination of patent licenses would threaten an end to the system of licensing of intellectual property that has evolved over many years to the benefit of both the licensor and the licensee and to the country s indirect benefits. S. Rep. No. 100-505, at 3 (1988), reprinted in 1988 U.S.C.C.A.N. 3200, 3202. Protection of U.S. patent licenses is even more important today. Each year, more than half of all U.S. patents are issued to companies based outside the United States. In today s economy, struggling companies often file for bankruptcy. Allowing foreign-based companies to renege on their licenses to U.S. intellectual property would wreak havoc on the semiconductor industry and many similarly situated industries. If the decision below were reversed, companies that hold U.S. patents would have the incentive to move their assets to foreign jurisdictions that 3

allow licenses to be stripped away in bankruptcy. Likewise, if U.S. license rights could be revoked in conjunction with a foreign bankruptcy, companies that design, manufacture, and sell products in the United States would feel less secure about their operations here and have the incentive to move their operations abroad. That is especially true when well-financed non-practicing entities ( NPEs ) are poised to buy up and sue on newly unencumbered U.S. patents that have been widely licensed and practiced in this country. Neither Dr. Jaffé nor the U.S. Government as amicus curiae even attempts to attack the extensive record below demonstrating the serious consequences to the Licensees and to the semiconductor industry if licensees rights could be terminated in conjunction with a foreign bankruptcy proceeding. Rather, they advance variants on the same general themes: (1) that U.S. bankruptcy law did not give the bankruptcy court below either the power to protect the Licensees or the U.S. economy from the devastating harm that would accompany the termination of their U.S. patent license rights or the power to protect the fundamental U.S. public policies surrounding patent rights, and (2) that the U.S. interest in deferring to a foreign bankruptcy proceeding must outweigh all other interests, including the interests of protecting existing rights to use U.S. intellectual property. As explained below, the arguments of Dr. Jaffé and the Government ignore the fact that foreign representatives in foreign bankruptcies derive great benefits, 4

including rights not available in the main proceeding, through the assistance of U.S. bankruptcy courts in dealing with U.S. assets such as patents. Dr. Jaffé obtained such benefits here. Once a request for such assistance is made, the U.S. bankruptcy laws expressly authorize, and indeed require, U.S. courts to consider the rights of all involved parties as well as fundamental U.S. public policies in setting conditions on the relief granted to foreign representatives. That is precisely what occurred here. When Dr. Jaffé moved under 11 U.S.C. 1521 to be designated the sole authority to control Qimonda s U.S. patent assets in the United States under the procedures and protections of U.S. bankruptcy law the bankruptcy court was empowered under both 11 U.S.C. 1521 and 1522 to condition that relief to promote the objectives of Chapter 15. The condition the bankruptcy court imposed that Dr. Jaffé must respect the license rights to Qimonda s U.S. patents, as required under U.S. law was entirely appropriate. The condition related directly to property rights that exist solely under U.S. law and apply solely within the United States. In addition, and independently, the bankruptcy court correctly concluded that allowing Dr. Jaffé to repudiate U.S. patent licenses, contrary to 365(n), would be manifestly contrary to the public policy of the United States in violation of 11 U.S.C. 1506. Congress made clear that preserving license rights 5

was critical to the U.S. economy, and there is no basis for categorically excluding economic policies from the purview of 1506. 6

STATEMENT OF THE ISSUES 1. Whether the arguments by Dr. Jaffé and the U.S. Government as amicus curiae that the bankruptcy court had no power to require Dr. Jaffé to honor licenses to Qimonda s U.S. patents have been waived and, even if not, whether those arguments misapprehend the provisions of and policies behind Chapter 15 of the Bankruptcy Code. 2. Whether the bankruptcy court acted within its discretion under 11 U.S.C. 1522(a) in finding that the interests of the Licensees outweighed those of Dr. Jaffé and the Qimonda estate and thus denying Dr. Jaffé s motion to remove the protection of 11 U.S.C. 365(n) from the Supplemental Order governing Qimonda s Chapter 15 proceeding. 3. Whether the bankruptcy court acted within its discretion under 11 U.S.C. 1506 in rejecting Dr. Jaffé s request to remove the protection of 11 U.S.C. 365(n) from the Supplemental Order governing Qimonda s Chapter 15 proceeding on the grounds that doing so would be manifestly contrary to the public policy of the United States. 7

STATEMENT OF THE CASE Qimonda is a German company that once manufactured semiconductor memory devices. Before its bankruptcy, Qimonda s portfolio of patents was licensed to the Licensees and nearly every other major semiconductor manufacturing entity in the world. This appeal involves the right of the Licensees to continue to exercise their license rights to U.S. patents notwithstanding Qimonda s bankruptcy. On June 15, 2009, Dr. Jaffé the administrator of the Qimonda estate in Germany filed an application for Recognition of a Foreign Main Proceeding in the United States Bankruptcy Court for the Eastern District of Virginia. R1. In doing so, Dr. Jaffé also sought relief under 11 U.S.C. 1520 and 1521 and identified Qimonda s U.S. patents as the estate s primary U.S. assets. R8:7-8; R7:3. On July 22, 2009, the bankruptcy court entered an Order granting Dr. Jaffé s petition for recognition and relief and a Supplemental Order that named him as Qimonda s foreign representative with the power to administer Qimonda s U.S. assets. R56; R57. The Supplemental Order also directed that 11 U.S.C. 365 be applicable in this proceeding, R57:3, thus requiring Dr. Jaffé to accept or reject executory contracts relating to Qimonda s U.S. assets in accordance with that provision. 8

On October 8, 2009, Dr. Jaffé moved to amend the Supplemental Order, seeking the removal of 365(n), which, generally speaking, requires continued recognition of existing license rights even if an executory license agreement has been rejected in bankruptcy. R96. On October 21, 2009, a group of parties with fully paid-up and irrevocable licenses to Qimonda s U.S. patents, including some of the appellees, filed objections to Dr. Jaffé s motion. R100; R105; R108. On November 19, 2009, the bankruptcy court granted Dr. Jaffé s motion and issued an Amended Supplemental Order that carved out 365(n). R178-R180. The Licensees appealed to the United States District Court for the Eastern District of Virginia, and on July 6, 2010, the district court vacated the bankruptcy court s Amended Supplemental Order and remanded for further factual development. 10-26-Dkt. 32-33. On remand, the bankruptcy court held a four-day hearing, R593-95, 610, and on October 28, 2011, denied Dr. Jaffé s motion based on two independent grounds, 1522 and 1506 of the U.S. Bankruptcy Code. R635- R636. This Court allowed Dr. Jaffé to file a direct appeal on June 28, 2012. 12-206-Dkt. 27. 9

STATEMENT OF FACTS A. Qimonda s Creation and Bankruptcy In May 2006, Infineon, one of the appellees here and a large German manufacturer of semiconductor products, spun off its memory division to create Qimonda. R635:2. As part of the 2006 spinoff, Infineon and Qimonda entered into a Carve-Out and Contribution Agreement ( COCA ), under which Infineon contributed to Qimonda tangible assets, facilities, and employees, as well as intangible assets and intellectual property rights. R635:5; IAX-180; OX-A 29. Those assets included about 20,000 patents and patent applications worldwide, including about 6,000 U.S. patents and applications, primarily covering semiconductor products and processes related to DRAM memory. OX-A 29. At the time, Infineon had dozens of patent cross-licensing agreements with other semiconductor companies. Id. 31. Some of those agreements were transferred to Qimonda, while in other cases the agreements remained with Infineon but still provided licenses to the patents transferred to Qimonda and future patents obtained by Qimonda. Id. 30, 31, 42, 48, 52, 63, 78. After the spin-off, Qimonda entered into additional licensing agreements. See, e.g., OX-A 63. By the time Qimonda declared bankruptcy in Germany in 2009, it had licensing agreements, directly or indirectly through its predecessor Infineon, with nearly every major manufacturer 10

of semiconductors in the world, including each of the Licensees that are appellees here. B. The Initial Proceedings Before the Bankruptcy Court and the Appeal to the District Court 1. Dr. Jaffé s Request for Chapter 15 Protection in U.S. Bankruptcy Court On June 15, 2009, following the commencement of Qimonda s German insolvency proceedings, Dr. Jaffé filed a Chapter 15 petition in the bankruptcy court seeking recognition of those proceedings and the authority to act on behalf of Qimonda s German estate as a foreign representative. R635:2. Dr. Jaffé cited Qimonda s U.S. patents as a basis for the bankruptcy court s jurisdiction to open the Chapter 15 case. 1 R273:2. The U.S. patents would be Dr. Jaffé s most valuable assets if he could strip them of their encumbrances. R635:4; 1Tr.54, 97. He has a duty under German law to maximize the value of the estate for creditors, but the patent licensees will become the estate s largest creditors by far if their licenses are canceled. 1Tr.123, 97. In the Supplemental Order, the bankruptcy court recognized the Qimonda German insolvency proceedings and granted the requested relief, but the court 1 The Licensees did not receive notice of the recognition proceedings and thus did not participate in those proceedings. 11

conditioned the relief on Dr. Jaffé s compliance with a number of provisions of the U.S. Bankruptcy Code, including 11 U.S.C. 365. R56; R57. Dr. Jaffé did not object to the bankruptcy court s conditions. Between May 2009 and July 2010, Dr. Jaffé notified each Licensee (except Micron) that he had elected not to perform their license agreements pursuant to 103 of the German Insolvency Code. Those licenses covered all Qimonda patents approximately 10,000 and patent applications. On October 8, 2009, after receiving notice from several Licensees of their intent to retain their rights to use the Qimonda patents under 365(n), Dr. Jaffé filed a motion to amend the Supplemental Order, seeking to remove 365 from that Order. R96. Dr. Jaffé argued that under German law he is permitted to cancel any license rights to the U.S. patents. Id. at 3-6. In response, a number of the Licensees opposed Dr. Jaffé s motion. R100; R105; R108. On November 19, 2009, the bankruptcy court issued an Amended Supplemental Order granting the motion and removing the protection afforded by 365(n). R179; R180. 2. The District Court s Reversal and Remand Several Licensees appealed the bankruptcy court s decision to amend the Supplemental Order to exclude the protections of 365(n). No party challenged or otherwise contested the bankruptcy court s decision to include 365 in the first instance, and the district court correctly assumed that under 11 U.S.C. 1521 and 12

1522, the bankruptcy court had discretion to condition the relief requested by Dr. Jaffé (to have sole authority to dispose of the U.S. patents under Chapter 15) on making 365 applicable to this proceeding. 10-26-Dkt. 32:8. After concluding that 365(n) did not automatically apply in a Chapter 15 proceeding, id. at 16-19, the district court determined that the bankruptcy court abused its discretion in removing 365(n) without giving adequate consideration to the requirements of 1522 and 1506. Id. at 11-14, 35-36. With respect to 1522, the district court recognized that when modifying or terminating relief under 1522(c), the bankruptcy court must ensure that the interests of the creditors and other interested entities, including the debtor, are sufficiently protected. Id. at 11. To apply that test, the district court held, and the parties correctly agree[d], that the bankruptcy court must balance the relief granted to the foreign representative and the interests of those affected by such relief, without unduly favoring one group over another. Id. at 11-12. Finding that it was unclear whether the Bankruptcy Court adequately balanced the parties interests, as required by 1522, the district court remanded to the bankruptcy court. Id. at 13. The district court independently found that the removal of 365(n) could not stand because the bankruptcy court neither addressed nor resolved th[e] important issue of whether the public policy exception of 1506 prohibits 13

granting comity to German law (which it assumed permits the cancellation of patent license rights in bankruptcy). Id. at 35. The district court remanded to the bankruptcy court to consider whether the relief granted violates fundamental U.S. public policies under 1506 and the principles discussed here. Id. C. The Evidentiary Hearing on Remand and the Bankruptcy Court s Denial of Dr. Jaffé s Motion to Remove 365(n) from the Supplemental Order On remand, the parties engaged in extensive fact and expert discovery on the 1522 and 1506 issues identified by the district court. The bankruptcy court then conducted a four-day evidentiary hearing on whether the removal of 365(n) from the Supplemental Order would (1) sufficiently protect the Licensees, the creditors, and the debtor under 1522, or (2) be manifestly contrary to the public policy of the United States under 1506. Many witnesses testified to the harms that would befall the Licensees specifically and the semiconductor industry generally if 365(n) were removed. The Licensees also proffered expert testimony from a preeminent economist, Professor Jerry Hausman of MIT, and introduced hundreds of supporting exhibits. On that record, the bankruptcy court found that the balancing of debtor and creditor interests required by 1522(a), Bankruptcy Code, weighs in favor of making 365(n) applicable to Dr. Jaffé s administration of Qimonda s U.S. patents. R635:1-2. It found the risk to the very substantial investment the 14

objectors particularly IBM, Micron, Intel, and Samsung have collectively made in research and manufacturing facilities in the United States in reliance on the design freedom provided by the cross-license agreements was very real and outweighed any monetary harm to Dr. Jaffé. Id. at 28-29. That determination was premised on numerous factual findings based on the extensive factual record. With respect to the interests of Dr. Jaffé, the bankruptcy court acknowledged that the estate s patents were its most valuable remaining assets, id. at 4, and that application of 365(n) will result in less value being realized by the Qimonda estate, id. at 28. It also considered Dr. Jaffé s eleventhhour offer to relicense the patents on unidentified but supposedly reasonable and non-discriminatory (RAND) terms as determined by Dr. Jaffé or arbitrated before a third party, but nevertheless found that the balance of harms favored the Licensees. Id. In particular, the bankruptcy court found that a patent thicket exists in the semiconductor industry, making it all but impossible to design around each and every patented technology used in any new semiconductor product. Id. at 15. That reality forces semiconductor manufacturers to obtain licenses to many different patents held by many different owners in order to protect against potential infringement claims. Id. Patent portfolio licensing is the only way of achieving design freedom the ability to design, manufacture, and sell semiconductor 15

products without fear of losing the massive sunk-cost investments required to remain competitive in the industry. Licensing ex ante minimizes the threat of hold-up preventing a semiconductor company that has invested billions of dollars in constructing manufacturing facilities from recovering those sunk costs ex post. The court recognized that the danger of hold-up is enhanced due to the semiconductor industry s heavy reliance on standards to promote the interoperability of semiconductor products, improve design and production efficiencies, reduce the uncertainty of investments, encourage innovation, and facilitate market entry. Id. at 16. The court detailed the many billions of dollars each Licensee had invested in research and development, in building fabrication facilities, and in developing advanced products to manufacture and to sell worldwide in reliance on the design freedom afforded by the license rights to the Qimonda U.S. patents. Id. at 4-12. All of that, the court found, would be put at risk and subject to the classic hold-up scenario without the protections of 365(n). Id. at 28-29. The bankruptcy court also weighed the grave threat to the industry as a whole, recognizing that introducing uncertainty around previously irrevocable patent licensing rights would result in less investment in research and development, less use of joint development initiatives, and less reliance on industry standards. Id. at 18. That, in turn, would harm innovation and competition in the 16