Fraunhofer-Gesellschaft Zur Forderung Der Angewandten Forschung E.V. v. Sirius XM Radio Inc.

REPLY BRIEF re MOTION to Dismiss for Failure to State a Claim

D. Del.June 5, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE FRAUNHOFER-GESELLSCHAFT ZUR FÖRDERUNG DER ANGEWANDTEN FORSCHUNG E.V., Plaintiff, v. SIRIUS XM RADIO INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 17-184-VAC-SRF DEFENDANT SIRIUS XM RADIO INC.’S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS PLAINTIFF’S COMPLAINT UNDER FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) OF COUNSEL: Jonathan S. Caplan Mark A. Baghdassarian P. Bradley O’Neill Shannon H. Hedvat KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, NY 10036 (212) 715-9100 Dated: June 5, 2017 Philip A. Rovner (#3215) Jonathan A. Choa (#5319) POTTER ANDERSON & CORROON LLP Hercules Plaza P.O. Box 951 Wilmington, DE 19899 (302) 984-6000 provner@potteranderson.com jchoa@potteranderson.com Attorneys for Defendant Sirius XM Radio Inc. Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 1 of 15 PageID #: 568 i TABLE OF CONTENTS Page I. INTRODUCTION .............................................................................................................. 1 II. SIRIUS XM CONTINUES TO HOLD AN IRREVOCABLE LICENSE TO THE ASSERTED PATENTS ...................................................................................................... 2 III. WORLDSPACE’S LICENSE RIGHTS TO THE ASSERTED PATENTS CONTINUE EVEN IF THE MCM LICENSE TERMINATED ............................................................. 6 IV. THE MCM LICENSE BETWEEN FRAUNHOFER AND WORLDSPACE WAS NOT TERMINATED AS A RESULT OF THE WORLDSPACE BANKRUPTCY ................. 7 V. CONCLUSION ................................................................................................................. 10 Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 2 of 15 PageID #: 569 ii TABLE OF AUTHORITIES Page(s) Federal Cases In re 6177 Realty Assocs., Inc., 142 B.R. 1017 (1992).................................................................................................................5 AMC Tech., L.L.C. v. SAP AG, No. Civ. A. 05-CV-4708, 2005 WL 3008894 (E.D. Pa. Nov. 3, 2005) ..............................................................................6 In re Biggs, 271 F. App’x 286 (3d Cir. 2008) ............................................................................................10 Chesapeake Fiber Packaging Corp. v. Sebro Packaging Corp., 143 B.R. 360 (D. Md. 1992) ................................................................................................9, 10 Chatlos Sys., Inc. v. Kaplan, 147 B.R. 96 (1992).....................................................................................................................5 Cuban v. Kapoor Bros., 652 F. Supp. 28 (E.D.N.Y. 1986) ..............................................................................................6 In re Diomed Inc., 394 B.R. 260 (Bankr. D. Mass. 2008) ......................................................................................8 Major League Baseball Promotion Corp. v. Colour-Tex, Inc., 729 F. Supp. 1035 (D.N.J. 1990) ...............................................................................................5 Rhone-Poulenc Agro S.A. v. DeKalo Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002)..................................................................................................4 In re Sjoquist, 484 B.R. 207 (Bankr. C.D. Cal. 2012) .....................................................................................10 Matter of Spencer, 115 B.R. 471 (D. Del. 1990) ....................................................................................................10 In re Stoltz, 315 F.3d 80 (2d Cir. 2002).......................................................................................................10 Sunbeam Prods. v. Chi. Am. Mfg., 686 F.3d 372 (7th Cir. 2012) .....................................................................................................8 Thompkins v. Lil’ Joe Records, 472 F.3d 1294 (11th Cir. 2007) .................................................................................................8 Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 3 of 15 PageID #: 570 iii In re Thompson–Mendez, 321 B.R. 814 (Bankr. D. Md. 2005) .......................................................................................10 Walker Dig., LLC v. Expedia, Inc., 950 F. Supp. 2d 729 (D. Del. 2013) ...........................................................................................3 In re Yachthaven Rest., Inc., 103 B.R. 68 (Bankr. E.D.N.Y. 1989) ...............................................5 Federal Statutes 11 U.S.C. § 365(a) .........................................................................................................................10 11 U.S.C. § 365(g) .........................................................................................................................10 11 U.S.C. § 541(a) ...........................................................................................................................9 11 U.S.C. § 554(a) .........................................................................................................................10 Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 4 of 15 PageID #: 571 I. INTRODUCTION Fraunhofer’s Opposition cannot dispute that (i) WorldSpace paid Fraunhofer $1M for an irrevocable license to, with the right to sublicense, the Asserted Patents under the MCM License, and (ii) Sirius XM paid WorldSpace over $1M for an irrevocable sub-license to the patents under the WorldSpace-XM Sublicense. These concessions should end this dispute because – as shown in Sirius XM’s opening brief – in these circumstances, Sirius XM’s sublicense survives any purported termination of the MCM License. In its Complaint, Fraunhofer asserted that WorldSpace and Sirius XM “lost all rights relating to Fraunhofer’s MCM technologies [which includes the Asserted Patents]” because the “irrevocable” MCM License and the WorldSpace-XM Sublicense were “rejected” in WorldSpace’s bankruptcy. See D.I. 1 at ¶ 27. Sirius XM’s opening brief proved that this assertion was legally erroneous. Caught short by its misunderstanding of elementary bankruptcy law, Fraunhofer pivots in its Opposition (D.I. 19) – with a proof of claim and a “termination letter” written five years after the alleged “rejection” that appeared nowhere in the Complaint – and posits a revised theory that Sirius XM’s sub-license was wholly dependent on the survival of the MCM License and disappeared upon the purported termination of that agreement. This new theory – like the original one – lacks any merit. To begin, Fraunhofer’s new theory violates fundamental tenets of contract interpretation. WorldSpace undisputedly granted to Sirius XM’s predecessor an irrevocable sub-license to the Asserted Patents, and nothing in any agreement – not a single word – conditions that sub-license on the survival of the MCM License. And Federal Circuit case law confirms that, in this situation, the rights of sub-licensees, such as Sirius XM, continue. This point ends the inquiry and renders Fraunhofer’s other arguments moot. Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 5 of 15 PageID #: 572 2 Because the MCM License concededly made WorldSpace’s license rights irrevocable, Fraunhofer is just plain wrong in contending that any alleged termination of the MCM License would affect Sirius XM’s sub-license rights. “Irrevocable” is a contract term that must be enforced. Confronted with the plain language of the MCM License, Fraunhofer claims (for the first time) that WorldSpace did not make all required payments under the MCM License – alleging that WorldSpace’s estate made no distributions on Fraunhofer’s bankruptcy claim for supposed reimbursement of expenses (totaling about 2% of the paid up license fees). That allegation is irrelevant as a matter of law because the express terms of the MCM License provided for the continuation of WorldSpace’s license rights upon payment of the license amounts specified under that agreement – which amounts undisputedly were all paid by 2001. The alleged failure to reimburse expenses simply cannot disturb the vested license rights. In all events, the MCM License did not terminate as a result of WorldSpace’s bankruptcy. Fraunhofer fundamentally misunderstands the operation of contract rejection in bankruptcy – a rejection does not result in termination. Plus the alleged 2015 “termination letter” – which is not part of the Complaint and was never provided to Sirius XM before the Opposition – plainly violates the automatic stay that is entered in all bankruptcy proceedings, making it void and unable to terminate the MCM License. For these reasons explained further below, the Complaint should be dismissed. II. SIRIUS XM CONTINUES TO HOLD AN IRREVOCABLE LICENSE TO THE ASSERTED PATENTS Fraunhofer’s attempt to eradicate Sirius XM’s irrevocable license to the Asserted Patents based on the purported termination of WorldSpace’s rights under the MCM License implodes under well-established tenets of contract law and the rights of sub-licensees to intellectual property. No language in either the MCM License or the WorldSpace-XM Sublicense makes Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 6 of 15 PageID #: 573 3 Sirius XM’s ongoing rights to the Asserted Patents subject to the survival of the MCM License. Quite the opposite – Sirius XM’s rights are expressly “irrevocable.” With no language to quote, Fraunhofer resorts to conclusory contentions lacking any support in the agreements. An agreement must be interpreted based on the language within its four corners and a court should not rewrite the agreement, add provisions not intended by the parties or render terms superfluous. See Walker Dig., LLC v. Expedia, Inc., 950 F. Supp. 2d 729, 734–35 (D. Del. 2013), opinion clarified, No. CV 11-313-SLR, 2013 WL 5799912 (D. Del. Oct. 25, 2013), aff’d (Dec. 30, 2014) (“A court’s interpretation of a contract ‘will give priority to the parties' intentions as reflected in the four corners of the agreement.’” (citations omitted)); see also D.I. 11 at 10 (citing cases that the term irrevocable in a contract should not be rendered superfluous). Had the parties intended to link the agreements in the way Fraunhofer now contends, they would have done so. But they did not. Even the Complaint acknowledges that both Fraunhofer and WorldSpace were well aware that the WorldSpace-XM Sublicense granted Sirius XM an irrevocable license to the Asserted Patents for the purpose of creating a digital audio broadcast system – precisely the opposite of the situation that Fraunhofer now posits: In 1998, Fraunhofer granted an exclusive right to WorldSpace to license all Fraunhofer intellectual property rights for MCM technologies suitable for use with digital satellite broadcasts” and “WorldSpace in turn granted a sub-license under the MCM License to [Sirius XM’s predecessor] . . . XM Satellite Radio Inc. . . . to use the sublicensed technology in connection with the development of XM Satellite’s Digital Audio Services System. D.I. 1 at ¶¶ 21, 22; see also D.I. 12-1, Ex. 1 at §§ 1.1, 3.1 (Under the MCM License, Fraunhofer granted WorldSpace the right to sublicense the Asserted Patents for use in the “WorldSpace Business” which is defined as “any business related to satellite and/or terrestrial broadcast to consumers.”). To secure such irrevocable sub-license rights, Sirius XM’s predecessor fully paid Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 7 of 15 PageID #: 574 4 an upfront license fee of $1M (and then paid millions more in license fees in subsequent years). D.I. 12-1, Ex. 3 at § 4. Given these conceded payments, it is simply outrageous for Fraunhofer to argue, twenty years later, that Sirius XM’s rights are somehow invalid. In addition to the unambiguous contract language, the Settlement Agreement approved by the Bankruptcy Court confirmed that Sirius XM’s sublicense to the Asserted Patents would “remain in full force and effect” after the WorldSpace Bankruptcy. D.I. 12, Ex. 5, Ex. A at § 5; see also id. at Recitals. Fraunhofer suggests otherwise (Opp. at 8), but its position is at odds with the Settlement Agreement and violates the tenets of contract law described above by trying to undo the clear language and intent of the Settlement Agreement. Fraunhofer’s further contention that, as a rule, a sub-licensee’s rights are dependent on the continued existence of a master license (Opp. at 12-13) is not only inconsistent with the contractual provisions, but also collides with the very case law on which Fraunhofer relies. In Rhone-Poulenc Agro S.A. v. DeKalo Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002), the Federal Circuit explained that “various treatises on patent licensing [provide] the proposition that a sublicense continues, even when the principal license is terminated” particularly in the situation where the “original license is terminated as a matter of contract law, e.g., for breach of contract.” Id. at 1334 (emphasis added).1 This case shows that Sirius XM’s sub-license rights continue as a matter of law irrespective of the MCM License. Fraunhofer offers five other cases – three within, and two outside, the bankruptcy context. None support its position. In re Yachthaven Rest., Inc., 103 B.R. 68 (Bankr. E.D.N.Y. 1989) involved a bankruptcy proceeding relating to a lease and license to real property rather 1 In addition to ignoring this portion of the opinion of Rhone-Poulenc, Fraunhofer erroneously contends that this case, which involves a fraud that resulted in rescinding an agreement, has any application to the instant action where Fraunhofer has made no such allegations. Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 8 of 15 PageID #: 575 5 than intellectual property. In that setting, the court noted that “[t]he common law rule is that a license in real property is revocable at the will of the licensor unless it is coupled with an interest or made irrevocable by the terms of the contract.” Id. at 74 (emphasis added). On its face, the case is inapposite because it relates to real property leases rather than a license to intellectual property, but the case actually confirms Sirius XM’s rights because the terms of the WorldSpace-XM Agreement expressly provide for an irrevocable license to the patents. In re 6177 Realty Assocs., Inc., 142 B.R. 1017 (1992) and Chatlos Sys., Inc. v. Kaplan, 147 B.R. 96 (1992) involved rejections of non-residential real property leases and are also off- point. Both cases expressly distinguished a rejection’s effect on non-residential real estate leases from its effect on other executory contracts. Section 365(d)(4) of the Bankruptcy Code explicitly requires that a debtor rejecting such a real property lease also “surrender the non-residential real property.” See 6177 Realty, 142 B.R. at 1019; Chatlos Sys., 147 B.R. at 98. “It is this surrender language in § 365(d)(4),” the court held, “which renders rejection of a non-residential real property lease different from other executory contracts in which rejection may not equal termination.” Id. (emphasis added). Likewise, Major League Baseball Promotion Corp. v. Colour-Tex, Inc., 729 F. Supp. 1035 (D.N.J. 1990) is easily distinguished. There, the licensee could grant a sublicense “only if [the licensee] obtained [the licensor’s] written approval of the subcontract.” Id. at 1042. By contrast, WorldSpace had no obligation to obtain any approval from Fraunhofer for its sublicense to Sirius XM – but Fraunhofer did in fact expressly grant WorldSpace the right to sublicense the Asserted Patents for a satellite radio service, such as the one implemented by Sirius XM.2 2 Fraunhofer’s reliance on Cuban v. Kapoor Bros., 652 F. Supp. 28 (E.D.N.Y. 1986) has absolutely no relevance to the instant motion. The case does not relate to or discuss intellectual Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 9 of 15 PageID #: 576 6 Fraunhofer additionally makes a legally irrelevant argument that Sirius XM’s license rights are limited to “some or all of the contractual rights granted to the licensee under the master license.” Opp. at 12. The argument goes nowhere because there is no dispute here regarding the scope of rights WorldSpace granted to Sirius XM – WorldSpace conveyed to Sirius XM an irrevocable license to the Asserted Patents as it was expressly permitted to do under the MCM License. D.I. 1 at ¶¶ 21, 22. This makes Fraunhofer’s reliance upon AMC Tech., L.L.C. v. SAP AG, 2005 WL 3008894 (E.D. Pa. Nov. 3, 2005) irrelevant. III. WORLDSPACE’S LICENSE RIGHTS TO THE ASSERTED PATENTS CONTINUE EVEN IF THE MCM LICENSE TERMINATED Fraunhofer’s claim that the termination of the MCM License necessarily would terminate Sirius XM’s rights in the Asserted Patents misreads the plain terms of the MCM License. Section 7.4 of the MCM License provides that termination or expiration of that agreement would not “effect the rights and licenses granted to WorldSpace under Article 3 . . . provided that WorldSpace has paid (or has agreed in writing to pay) all of the amounts specified in Article 4 . . . as of the date of termination or expiration.” D.I. 12-1, Ex. 1 at § 7.4 (emphasis added). But the only “amounts specified” to be “paid” in Article 4 of the MCM License are $1M in License Fees enumerated in Section 4.1. Id. at § 4.1 (“WORLDSPACE shall pay license fees to FRAUNHOFER I the sum of One Million U.S. Dollars ($1,000,000) payable as follows”) (emphasis added). Fraunhofer does not dispute that these “amounts specified” were “paid” no later than 2001. Instead, Fraunhofer relies on a proof of claim it filed in the Bankruptcy Court – a document omitted from the Complaint – to argue that, in 2010, a decade after Fraunhofer received $1M in license fees, WorldSpace’s estate did not reimburse Fraunhofer under Section property licenses, but rather involves various allegations relating to RICO violations and whether res judicata principles should bar subsequent lawsuits after an initial lawsuit had been settled. Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 10 of 15 PageID #: 577 7 4.2 of the MCM License for approximately $20,000 in expenses advanced after the bankruptcy filing. Even if this document constituted a valid claim for “reimbursement” (which it does not), Section 4.2 requires only “reimbursement” – not “payment” – and does not “specify” any “amounts” like Section 4.1 does.3 As such, Fraunhofer’s claim for reimbursement cannot trigger the proviso from Section 7.4 or cut off WorldSpace’s irrevocable license to the Asserted Patents. Because WorldSpace had long since paid Fraunhofer all license fees owed, and reimbursement for expenses have no relevance to WorldSpace’s irrevocable rights to the Asserted Patents, Fraunhofer could not terminate the MCM License through its “termination letter” in 2015. Indeed, under the terms of the MCM License, only WorldSpace has the right to unilaterally terminate the agreement by written notice. D.I. 12-1, Ex. 1 at § 7.1 (“this Agreement may be terminated by mutual written agreement between the Parties, or by WORLDSPACE at any time or for any reason upon written notice to FRAUNHOFER.”) (emphasis added). IV. THE MCM LICENSE BETWEEN FRAUNHOFER AND WORLDSPACE WAS NOT TERMINATED AS A RESULT OF THE WORLDSPACE BANKRUPTCY The MCM License was not terminated as a result of the WorldSpace bankruptcy proceedings for a number of reasons. 3 Notably, WorldSpace represented to the Bankruptcy Court that administrative claims, such as Fraunhofer’s proof of claim, had actually been paid. See In re WorldSpace, Inc., et al, Case No. 08-12412-LSS, D.I. 1587 at ¶ 9 (Bankr. D. Del. May 16, 2012) (attached hereto as Exhibit A). Nevertheless, the reimbursement sought by Fraunhofer from the invoice fails to qualify as reimbursable expenses under Section 4.2 of the MCM License. Section 4.2 only permits reimbursement for “reasonable fees and costs incurred in connection with the preparation, filing and prosecution of MCM Intellectual Property Rights [which includes the Asserted Patents].” D.I. 12-1, Ex. 1 at § 4.2 (emphasis added). Here, Fraunhofer’s invoice is dated years after the Asserted Patents issued and therefore, by definition, the expenses cannot be for their “preparation, filing or prosecution” but instead must relate to maintenance fees which are not reimbursable. Section 4.2 further requires “a detailed and itemized invoice listing the expenses incurred by FRAUNHOFER and attaching copies of any available documentation evidencing such expenses.” Id. Fraunhofer’s Proof of Claim contains none of this required detail. Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 11 of 15 PageID #: 578 8 First, even assuming the MCM License was rejected, Fraunhofer is simply wrong that the rejection terminated that agreement. See Opp. at 11-12. As Judge Easterbrook explained in Sunbeam Prods. v. Chi. Am. Mfg., 686 F.3d 372 (7th Cir. 2012), Section 365(g) of the Bankruptcy Code specifies that rejection constitutes a prepetition breach – not a termination – and thus has “absolutely no effect on the contract’s continued existence.” Id. at 377. Fraunhofer cannot distinguish Sunbeam as based on Section 365(n) of the Bankruptcy Code. The decision makes clear that it relies on Sections 365(a) and (g) of the Bankruptcy Code, not 365(n). Fraunhofer’s Opposition also does not dispute that rejection has no effect on those portions of a contract that have been fully performed. Instead, it tries to distinguish Thompkins v. Lil’ Joe Records, 472 F.3d 1294 (11th Cir 2007), because that case involved a sale of copyrights, rather than a license to patents. Opp. at 17-18. Fraunhofer misses the point. It granted WorldSpace an “irrevocable, worldwide, exclusive” license to the MCM Technologies that was fully paid upon Fraunhofer’s receipt of the final installment of the $1 million license fee. At that point, Fraunhofer’s irrevocable grant of the license to WorldSpace was fully executed – like the transfer in Lil’ Joe Records – and could not be disturbed by rejection.4 Second, Fraunhofer’s attempt to argue that the MCM License was terminated independently of any contract rejection – an assertion absent from its Complaint – is unsupported. The colloquy at the June 1, 2010 hearing on which it relies does not contemplate the termination of the MCM License. See Opp. at 5-6. Rather, any discussion of termination was in connection with two other agreements, not the MCM License. In addressing the MCM 4 In re Diomed Inc., 394 B.R. 260 (Bankr. D. Mass. 2008), which Fraunhofer relies upon (Opp. at 12), addressed a license that, unlike the MCM License, was neither perpetual nor irrevocable. Diomed expressly reaffirmed the well-established principle that “[r]ejection does not constitute a termination of the contract. . . . It does not cause a contract to magically vanish.” Id. at 268 (quotation omitted). Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 12 of 15 PageID #: 579 9 License, the transcript mentions only a conditional “deemed reject[ion]” of the MCM License, not termination. See D.I. 20-1, Ex. E at 46:7-10. More importantly, whatever colloquy occurred, the Bankruptcy Court never entered an order requiring that the MCM License be terminated (or rejected). Nor could it properly have done so because WorldSpace and Fraunhofer never filed a motion seeking termination (or rejection) of the MCM License or provided notice to WorldSpace’s creditors of such a motion. In fact, WorldSpace’s Sale Motion – which is what was before the Bankruptcy Court at the June 1, 2010 hearing – did not seek authorization to terminate or reject any contract; it only sought authority to assume and assign contracts. Third, Fraunhofer’s new claim that its November 2015 Letter terminated the MCM License is transparently mistaken. As an initial matter, if Fraunhofer truly believed that the MCM License had been terminated by agreement in 2010, it is a mystery why it allegedly sent a termination letter five years later. And the letter, which violated the automatic stay imposed in all bankruptcy proceedings, is void. Upon the filing of the WorldSpace bankruptcy, the MCM License became property of WorldSpace’s estate. See 11 U.S.C. § 541(a). Under Section 362(a)(3), upon a bankruptcy filing, the automatic stay bars any effort “to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.” See Chesapeake Fiber Packaging Corp. v. Sebro Packaging Corp., 143 B.R. 360, 372 (D. Md. 1992), aff’d, 8 F.3d 817 (4th Cir. 1993) (assignor’s post-petition letter purporting to terminate assignment of patent to debtor was void as violating automatic stay). As such, until the Bankruptcy Court lifted the stay with respect to the MCM License (which never happened), any action to assert control over the license Fraunhofer granted – like the November 2015 Letter – was void ab initio. Id.; see also Matter of Spencer, 115 B.R. 471, 484 (D. Del. 1990) (actions taken in violation of a Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 13 of 15 PageID #: 580 10 bankruptcy stay are “void and without effect”) (quoting In re Ward, 837 F.2d 124, 126 (3d Cir.1988)). Fraunhofer tries to sidestep the automatic stay by arguing that rejection of the MCM License also constituted abandonment of that license by the estate. Opp. at 15 n.10. This argument, too, is mistaken. Rejection and abandonment are governed by separate provisions of the Bankruptcy Code and subject to differing standards. Compare 11 U.S.C. § 365(a) (assumption or rejection) with § 554 (abandonment). As explained above, Section 365(g) establishes the effect of rejection – and nowhere refers to “abandonment” or Section 554. See In re Sjoquist, 484 B.R. 207, 216–17 (Bankr. C.D. Cal. 2012) (“Even if the [agreement] was held to be executory and thus deemed rejected under § 365(d)(1), that rejection does not effectively abandon it to Debtor”); In re Thompson–Mendez, 321 B.R. 814, 819 (Bankr. D.Md.2005) (“The statutory breach of contract simply put the estate in the position of a breaching party to the executory contract. Accordingly, rejection under the Bankruptcy Code did not divest the estate from the breaching party’s rights under the terms of the contract and applicable state law.”).5 V. CONCLUSION For the foregoing reasons and those set forth in its Opening Brief, Sirius XM respectfully requests that the Court dismiss Fraunhofer’s Complaint in its entirety with prejudice. 5 In re Biggs, 271 F. App’x 286, 288 (3d Cir. 2008) is unpublished and therefore without precedential effect, and it does not consider either Sections 365(g) or 554 of the Bankruptcy Code. Opp. at 15. Its holding appears to have been based on the trustee’s finding “that there are no assets to administer for the benefit of creditors of this estate” and the trustee “has received no funds or property of the estate.” No such finding was made here. In re Stoltz, 315 F.3d 80 (2d Cir. 2002), is similarly unhelpful to Fraunhofer, as the decision addresses a real property lease rather than a contract and, in any event, expressly states that “[a] rejected lease is treated as if the debtor breached it immediately prior to the petition date . . . and the parties are generally left with the rights and remedies available outside of bankruptcy law.” Id. at 86 n.1. Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 14 of 15 PageID #: 581 11 OF COUNSEL: Jonathan S. Caplan Mark A. Baghdassarian P. Bradley O’Neill Shannon H. Hedvat KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, NY 10036 (212) 715-9100 Dated: June 5, 2017 5223345 POTTER ANDERSON CORROON LLP By: /s/ Philip A. Rovner Philip A. Rovner (# 3215) Jonathan A. Choa (#5319) Hercules Plaza P.O. Box 951 Wilmington, DE 19899 Tel: (302) 984-6000 provner@potteranderson.com jchoa@potteranderson.com Attorneys for Defendant Sirius XM Radio Inc. Case 1:17-cv-00184-VAC-SRF Document 29 Filed 06/05/17 Page 15 of 15 PageID #: 582 EXHIBIT A Case 1:17-cv-00184-VAC-SRF Document 29-1 Filed 06/05/17 Page 1 of 7 PageID #: 583 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE -------x Chapter 11 In re: WORLDSPACE, INC., et al., 1 Case No. 08 - 12412 (PJW) (Jointly Administered) Debtors. -------------------------------------------------x Objection Deadline: May 30, 2012 at 4:00 p.m. (prevailing Eastern time) Hearing Date: June 6, 2012 at 9:30 a.m. (prevailing Eastern time) DEBTORS’ MOTION TO CONVERT CASES FROM CHAPTER 11 TO CHAPTER 7 OF THE BANKRUPTCY CODE WorldSpace, Inc. ("WorldSpace"), on behalf of itself and its affiliated debtors and debtors in possession in the above-captioned cases (collectively, the "Debtors"), hereby move (this "Motion") this Court, pursuant to section 1112(a) of chapter 11 of title 11 of the United States Code, 11 U.S.C. § § 101 et seq. (the "Bankruptcy Code") and Rules 1017(f)(2) and 9013 of the Federal Rules of Bankruptcy Procedures (the "Bankruptcy Rules"), for entry of an order (the "Order") converting these cases from chapter 11 of the Bankruptcy Code to chapter 7 of the Bankruptcy Code. In support thereof, the Debtors respectfully represent as follows: Preliminary Statement 1. On June 24, 2010, the Debtors completed a sale of substantially all of their assets to Yazmi USA LLC. The Debtors do not believe that they will be able to propose or The Debtors in these proceedings, along with the last four digits of each Debtor’s federal tax identification number, are: WorldSpace, Inc. (2881); AfriSpace, Inc. (3956); and WorldSpace Systems Corporation (0695); each with a mailing address of 8515 Georgia Avenue, Silver Spring, MD 20910; and WorldSpace Satellite Company Ltd. (7577), with a mailing address of Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, BVI. DOCSDE:180254.2 95005-001 Case 08-12412-LSS Doc 1587 Filed 05/16/12 Page 1 of 6Case 1:17-cv-00184-VAC-SRF Document 29-1 il 6/05/ 7 2 f 7 PageID #: 584 confirm a plan in these cases, and are incurring administrative expenses. Based on these circumstances, the Debtors request that the Court grant the Motion to convert these cases as soon as possible. Jurisdiction 2. This Court has jurisdiction to entertain this Motion pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. Consideration of this Motion is a core proceeding pursuant to 28 U.S.C. § 157(b). 3. The statutory predicate for the relief requested herein are Bankruptcy Code section 1112(a) and Bankruptcy Rules 1017(f) and 9013. Background 4. On October 17, 2008 (the "Petition Date"), each of the Debtors other than World5pace Satellite Company Ltd. ("SatCo") filed a voluntary petition in this Court for relief under chapter 11 of the Bankruptcy Code. An official committee of unsecured creditors (the "Creditors’ Committee") was appointed on October 29, 2008 in the cases of the Debtors other than SatCo. On May 18, 2010, SatCo filed a petition under chapter 11 of title 11 of the Bankruptcy Code. On June 1, 2010, the Court entered an order directing that SatCo’s chapter 11 case be jointly administered with that of the other Debtors (Docket No. 1038). The Debtors have continued to operate their business and manage their properties as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 5. WorldSpace is a Delaware corporation based in Maryland. On June 24, 2010, the Debtors completed a sale of substantially all of their assets to Yazmi USA LLC (the "Sale"). Prior to June 24, 2010, WorldSpace and its Debtor and non-debtor affiliates provided satellite-based radio and data broadcasting services to more than 170,000 (as of 2 DOCS_DE:180254.2 95005-001 Case 08-12412-LSS Doc 1587 Filed 05/16/12 Page 2 of 6Case 1:17-cv-00184-VAC-SRF Document 29-1 il 6/05/ 7 3 f 7 PageID #: 585 June 30, 2008) paying subscribers in ten countries throughout Europe, India, the Middle East, and Africa. The Debtors and their affiliates operated two geostationary satellites, AfriStar and AsiaStar, which were owned by SatCo and which were in orbit over Africa and Asia. Another completed satellite was in storage. 6. The other operations of the Debtors and their affiliates included operating associated ground systems that provided content to and control satellites, a terrestrial repeater network to be built out (subject to regulatory approval) in each of the Debtors’ target markets in order to facilitate a mobile service, and the receivers owned by the Debtors’ customers. The principal assets of the Business included (i) two completed satellites in orbit, (ii) a satellite in storage, (iii) related operational ground equipment and intellectual property, and (iv) related regulatory licenses and various contracts. 7. Following the closing of the Sale, the Debtors completed the process of resolving transition issues and post-closing obligations under the Sale documents. 8. As of the date of this Motion, approximately $9,975.00 remain in the Debtors’ estates. 9. The Debtors believe that almost all administrative expenses have been or on the date of the hearing on this Motion will have been paid, other than Bankruptcy Code §503(b)(9) claims and certain administrative claims. 2 Relief Requested 10. The Debtors respectfully request that the Court enter an order pursuant to Bankruptcy Code section 1112(a) converting these cases to cases under chapter 7 of the Bankruptcy Code. In addition to the section 503(b)(9), the Debtors have not paid administrative claims filed by Noah Samara, Hussein Sallam and the Delaware Secretary of State. DOCSDE:180254.2 95005-001 Case 08-12412-LSS Doc 1587 Filed 05/16/12 Page 3 of 6Case 1:17-cv-00184-VAC-SRF Document 29-1 il 6/05/ 7 4 f 7 PageID #: 586 Basis for Relief 11. Section 1112(a) of the Bankruptcy Code governs the voluntary conversion from chapter 11 to chapter 7. Section 1112(a) provides that a debtor may convert a chapter 11 case to a case under chapter 7 at any time as of right. Specifically, section 1112(a) states: The debtor may convert a case under this chapter to one under chapter 7 of this title unless (1) the debtor is not a debtor in possession; (2) the case originally was commenced as an involuntary case under this chapter; or (3) the case was converted to a case under this chapter other than on the debtor’s request. 11 U.S.C. § 1112(a). 12. Section 1112(a), therefore, gives a chapter 11 debtor the right to convert to chapter 7 unless one of the enumerated exceptions in section 11 12(a)(1)-(3) is applicable. See, e.g., In re Dieckhaus Stationers of King of Prussia, Inc., 73 B.R. 969, 971 (Bankr. B.D. Pa. 1987) (stating that section 1112(a) "gives a debtor in possession an absolute right to convert, unless the case is governed by one of the enumerated exceptions"); Abbott v. Blackwelder Furniture Co., 33 B.R. 399, 401 (W.D.N.C. 1983) ("Congress provided the Chapter 11 debtor with the absolute right to accomplish voluntary conversion to a Chapter 7 liquidation without Court approval."); see also Fed. R. Bankr. P. 1017(0(1) and 1017(0(2) (conversion under section 1112(a) is requested by motion under Rule 9013 but is not to be treated as a contested matter under Rule 9014). 13. In the Debtors’ cases, none of the enumerated exceptions to Bankruptcy Code section 1112(a) apply: (1) the Debtors are debtors in possession under sections 1107 and 1108 of the Bankruptcy Code; (2) these cases were commenced by the filing of voluntary is DOCS_DE: 180254.2 95005-001 Case 08-12412-LSS Doc 1587 Filed 05/16/12 Page 4 of 6Case 1:17-cv-00184-VAC-SRF Document 29-1 il 6/05/ 7 5 f 7 PageID #: 587 chapter 11 petitions; and (3) these cases were not converted to chapter 11 from another Chapter of the Bankruptcy Code. Thus, the Debtors are entitled, as a matter of right, to convert these cases to cases under chapter 7 of the Bankruptcy Code. 14. In addition to the legal right to convert these cases to chapter 7, the Debtors believe that converting these cases to chapter 7 is in the best interest of their estates and creditors. The Debtors’ continue to incur administrative expenses in these chapter 11 cases and have limited cash. Accordingly, the Debtors respectfully request that the Court enter an order converting these cases from chapter 11 to chapter 7. Notice 15. Notice of this Motion has been provided to: (i) the Office of the United States Trustee for the District of Delaware; (ii) counsel for the Committee; and (iii) those parties who have requested notice pursuant to Bankruptcy Rule 2002 and Rule 2002-1(b) of the Local Rules. The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given. No Prior Refluest 16. No prior application for the relief sought herein has been duly made by the Debtors to this or any other Court. [Remainder ofpage intentionally left blank] 5 DOCS_DE: 180254.2 95005-001 Case 08-12412-LSS Doc 1587 Filed 05/16/12 Page 5 of 6Case 1:17-cv-00184-VAC-SRF Document 29-1 il 6/05/ 7 6 f 7 PageID #: 588 WHEREFORE, the Debtors respectfully request that the Court enter an order substantially in the form attached hereto converting these cases from chapter 11 to chapter 7 of the Bankruptcy Code and grant the Debtors such additional relief as necessary and appropriate. Dated: May 16, 2012 PAC SKI STANG ZJEHL & JONES LLP I Laura Davis Jon(BrNo. 2436) Timothy P. Cairns (Bar No. 4228) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 (Courier 19801) Telephone: (302) 652-4100 Facsimile: (302) 652-4400 Email: ljones@pszjlaw.com tcaimspszjlaw.com F. M14 SHEARMAN & STERLING LLP Andrew V. Tenzer Randall L. Martin 599 Lexington Avenue New York, NY 10022 Telephone: (212) 848-4000 Facsimile: (212) 848-7179 Email: atenzer@shearman.com randy.martin@shearman.com Counsel for the Debtors and Debtors in Possession 6 DOCSDE: 180254.2 95005-001 Case 08-12412-LSS Doc 1587 Filed 05/16/12 Page 6 of 6Case 1:17-cv-00184-VAC-SRF Document 29-1 il 6/05/ 7 7 f 7 PageID #: 589