Professional Documents
Culture Documents
No. 96-2028
Appellants,
v.
Appellee.
____________________
____________________
Before
Circuit Judges.
______________
____________________
Burn
____
with whom
were
____________________
ate appeal
to the district
and Pasteur
from
Biotech
Corporation
utilize
Pasteur
present dispute
("CBC"),
patents.
the
The
holder of
Plan provision
two
licenses
central
to
to the
of appellant Pasteur.
I
I
BACKGROUND
BACKGROUND
__________
CBC
with
AIDS.
Its
approximately
HIV
$14
diagnostics
million in
division annually
revenues.
Type 2
holds
the
("HIV2 procedures").
exclusive
right
to
generates
Institut Pasteur,
Virus
associated
Pasteur
use
and
diagnosing HIV
Sanofi Diagnostics
sublicense
Institut
Pasteur's patents.
In October
cross-license
perpetual
1989, CBC
agreements, whereby
license to
incorporate Pasteur's
use
some of
each acquired
the
into mutual
a nonexclusive
technology patented
or
right to
any diagnostic
kits
sold
assigning
License, at
other
or sublicensing
to others.
See
___
Royalty-Free Cross-
8.1 ("[N]o
of this Agreement.").
Nevertheless, either
Pasteur or CBC
was
this Agreement so
regard
Company"
is defined
controlled
as "an
by a party or
Id.
___
1.4.
organization which
an organization which
"Affiliated
controls or
is
is under common
CBC
business
reorganization
plan
365
(executory
diagnostics
as
debtor-in-possession.
contracts),2
division
continue
Its
to
operate
utilizing Pasteur's
its
patented
retroviral
HIV2 proce-
giant
French
biotechnology
to a subsidiary of
corporation
and
bioMerieux, a
Pasteur's
direct
____________________
2The
contracts,"
parties.
their interpretation.
provide that
See Royalty-Free
___
9; Royalty-Bearing Cross-License, at
Massachusetts
the cross-licenses
performance remains
Cross-Li-
10.
are "executory
due by
both
sales.
Pasteur previ-
ously had licensed bioMerieux to use its HIV2 procedures, but the
earlier
license
related to
system),
the United
States, Canada,
single
product manufactured
VIDAS sales in
by
test
New Zealand,
Plan.
Citing
contended
amounted
Bankruptcy Code
that the
to CBC's
365(c), 11 U.S.C.
proposed sale of
assumption of
CBC's stock
the patent
365(c), it
to bioMerieux
cross-licenses and
their
the presumption
of
nonassignability
provision
contained in
Pasteur's licensing
have
granted
ordained
by
the cross-licenses.
director,
the
nonassignability
Isabelle
its competitor,
bioMerieux,
federal
or
Bressac,
would not
a subsidiary,
The
bankruptcy
cross-licenses
over
proposed sale of
facto
_____
court
authorized
Pasteur's objection.
CBC
It
to
assume the
ruled that
the
"assignment"
of
merely
an assumption
debtor
under new
the cross-licenses
of the
to
cross-licenses by
ownership, and
bioMerieux,
but
the reorganized
365(c)
because
the prepetition
as debtor-in-possession
licensing relationship
between Pasteur
Tr.
176-77.3
The district
court upheld
the
bankruptcy court
II
II
DISCUSSION
DISCUSSION
__________
A.
A.
Appellate Jurisdiction
Appellate Jurisdiction
______________________
Citing
our decision
in
Rochman
_______
v. Northeast Utils.
_________________
Serv. Group (In re Public Serv. Co. of N.H.), 963 F.2d 469 (1st
____________ _______________________________
tion.
remedies
It contends that
for preserving
appellate jurisdic-
Pasteur failed to
of the
temporary stay
confirmation
stay
on October 9,
1996.4
See
___
1981) (noting
____________________
length.
op. at 7, 12.
by August 2, 1996,
as scheduled, and
court to
vacate the
clients
a final consummation
pending stay,
In
the
claiming that
further
year, jittery
declined by 10%.
Justice if
necessary).
Since CBC
afforded
complete
bankruptcy
court has
consummated
relief because
Plan.
neither
jurisdiction over
much of
this
the many
court nor
the
third parties
pursuant to,
the
provisions, because
by CBC is
of its retroviral
diagnostics business,
standpoint, is
and,
"deal-busting" component
("[P]rovisions of
of
to
CBC's
plan
See
___
Plan
IX.B.2.a
are nonseverable
our
and
Public Service
_______________
dissolution) of
consummation
Order
suggestion,
premature
Plan.
We disagree.
courts
the
the Confirmation
mutually dependent.").
Contrary
from bioMerieux's
prior to
that appellate
of jurisdiction by
a stay
final
which results
disposition
in substantial
of the
appeal.
______________
circumstantial considerations.
Cir. 1992)
See
___
(noting that
Public Service
______________
contem-
consideration
appel-
lants in
of their notable
lack of
diligence, a full
F.2d at 472.
stay throughout
sixteen months
had
963
As a consequence
In re Public Serv.,
__________________
the three-month
period which
elapsed following
cate Plan
provisions, as well
extraordinarily intri-
as a multi-billion
dollar enter-
prise,
with
following
the
the
result
that any
substantial
court on remand.'"
Id.
___
attempted
and unexcused
Plan
lapses
dismantling
by appellants
at 474 (citation
omitted); see,
___
e.g.,
____
Baker & Drake, Inc. v. Public Serv. Comm'n of Nev., 35 F.3d 1348,
___________________
___________________________
1351-52 (9th
noting that
Cir.
1994) (finding
reorganization plan
billion-dollar affair"
vice).
____
ties,
Although
appellate
at
issue was
jurisdiction,
"not a
in Trone and
_____
and
complex,
Public Ser___________
own complexi-
more recently in
____________________
5The
equitable
Service are
_______
and
symbiotic.
pragmatic
tests
employed
in
Public
______
is a big
its sale of
stock to
365(c)
Assocs.
_______
(In re DN Assocs.), 3
__________________
Bankruptcy Code
F.3d 512,
515 (1st
Cir. 1993)
(noting that
where appeal
B.
B.
The Merits6
The Merits
__________
Pasteur argues
assignment of
Bankruptcy Code
that the
CBC Plan
effects a
bioMerieux, contrary to
The trustee
[viz., CBC]7
____
or
de facto
__ _____
. . . prohibits or
re-
such contract .
a party[]
[viz., Pasteur]
____
. .
from accepting
____________________
prudent
to upset
('equitable mootness'),"
confu-
the plan
of
reorganization at
this late
conclusions of law de
__
novo
____
and the bankruptcy court's findings of fact for clear error only.
See Petit v. Fessenden, 80 F.3d 29, 32 (1st Cir. 1996).
___ _____
_________
7As
debtor-in-possession,
CBC has
substantially
the same
Bankruptcy Code
1107.
365.
See 11
___
performance
from
or rendering
perfor-
whether or
(B)
11 U.S.C.
365(c)(1).
Pasteur
argues that
in
order
to
encourage
optimum
product
innovation the
federal common
parties absent
rule of
"applicable
365(c)(1)(A),
accept
within
which precludes
performance
from
bioMerieux's subsidiary
assuming
Inc.
____
the
or assigning
__
meaning
thus qualifies
of
Pasteur from
any entity
other
Bankruptcy
being
than
as an
Code
compelled to
CBC
e.g.,
____
these cross-licenses.
to third
(1948).
presumptive nonassignability
law,"
patents presumes
law
law of
See
___
Everex Sys.,
____________
state law
relating to
says Pasteur,
debtor simply
assignment
__________
to a third
section 365(c)
Further,
might allow
without a subsequent
_______ _ __________
in
__
substance
_________
bioMerieux, a
it
was an
assignment
complete stranger to
of
the cross-licenses
to
agreements.
These
contentions are
(1st
Cir.
Bankruptcy
1995),8
which
Code subsections
legislative history.9
urged
to
debtor
it
test."
analyzed
and
365(c) and
interpreted
in
69 F.3d 608
companion
(e) and
their relevant
Leroux we were
______
Under such
365(c) and
an
(e) as
approach, the
mandating a
chapter 11
either
our decision
interpret subsections
"hypothetical
foreclosed by
the
particular
the contract to
executory
contract
another entity, if
or
the
applicable
nonbankruptcy law
cally
purported to terminate
its assignment to an
11 petition or to preclude
Id. at
___
612.
We rejected
holding
instead that
case-by-case inquiry
subsections 365(c)
into
whether the
and (e)
nondebtor
in Leroux,
______
contemplate a
party
(viz.,
____
____________________
8See
___
Cir.) ("In
for
the most
part, bound
by prior
panel decisions
closely on
9Bankruptcy Code
contractual termination
lease, whether
or not
such contract
or lease
prohibits or
and (ii)
such
. ."
11 U.S.C.
10
Pasteur) actually
________
transaction
and
contracted."
continue to perform
under an executory
debtor-in-possession is a legal
prepetition
debtor with
Pasteur) contracted.
96th
Cong.,
2d
Id.
___
Sess.
rights of
court
the
Where
the particular
ruptcy court
the
Id.
___
as a matter of
whom
the
nondebtor party
27(b)
(1980);
528 (1984)).
NLRB
____
v.
from
(viz.,
____
No. 1195,
Bildisco &
__________
Rather, "sensitive
to the
the nondebtor
the bankruptcy
performance actually to
be rendered by
debtor-in-possession
with
view
to
ensuring
that
the
[its] bargain."
Cong., 2d Sess.
Id.
___
at 612-13
(citing S.
Rep. No.
989, 95th
U.S.C.C.A.N. 5787,
5845).
made by
CFLC, Inc.,
___________
89 F.3d
673 (9th
adopted
of law
constitute error.
same position
as the debtor
Cir.
1996), upon
in
which Pasteur
____________________
10We
are not
persuaded
contention that
by Pasteur's
to follow it.
Pasteur
the
indicates that
itself cited
11
ed for an outright
an entirely
different corporation
never contracted.
Id. at
___
license to
patent holder
679-80.
By
proposes to continue,
which
functioned prepetition,
while
utilizing
Pasteur's
HIV2
different than
the prepetition
chapter 11 filing
legal entity
but because
than before
CBC shareholder.
entity,
it is
namely,
not due
now owned
_____
merely to
by a
__
its
different
cross-
ownership of
the
licensee-corporation's assets
(including
its
Rather, as a
276, 281
v.
Absent compelling
grounds for
therefore, CBC's
separate legal
the
sharehold-
6 William
M.
disregarding its
corporate form,
ownership of
12
See
___
id.
___
(holding that
does
not
alter
corporation's
Indus.
______
corporation's sale of
its identity,
executory
nor
contracts or
all its
effect
capital stock
transfer of
licenses);
see
___
the
also PPG
____ ___
cert. denied, 444 U.S. 930 (1979) (same; distinguishing mere sale
_____ ______
of
merger wherein
merging licensee
existence).
negotiated
and given
CBC's corporate
law, supra
_____
governing Massachusetts
continuing rights
its
under the
stock ownership
or
cross-licenses based on
corporate control.
changes in
See id.
___ ___
at
1095
license
provision); see
___
Nevertheless,
limiting
these cross-licenses
or terminating
ownership
also Seagram,
____ _______
were to
CBC's
change hands.
519 N.E.2d
contain no
rights in
The
the
at 280-81.11
provision either
event its
stock
generic nonassignability
Cross-License,
solely
for
at
7.1 ("This
the benefit
of the
Agreement .
parties
. . has
been made
hereto" and
"no other
the product-
13
Agreement."), plainly
circumstance presented
here.
virtue
of its acquisition of
own
rights under
the
bioMerieux's subsidiary, by
cross-licenses would
terminate with
any
___
Other
cross-license
provisions
Archbishop of Boston,
____________________
that a contract
licenses
with
any
must be interpreted as
"affiliated company,"
undercut
explicitly authorize
directly
CBC to
which
a whole).
share its
on
These
(noting
cross-
license rights
its face
presumably
Cross-Licenses, at
organization
1.4
which controls
I.
Yet
. .
. a
party or
an organization
more importantly,
supra Section
_____
a provision
Pasteur
might extend
to a
company called
indirectly, by
any
struction,
otherwise."
_________
added);
person
amalgamation,
sublicense
Genetic Systems
of
connected
at the date
acquisition
___________
Royalty-Free
which
. . be acquired, directly
or group
such control
as "an
of
__
Cross-license,
F.2d at
persons
hereof, by
shares or
______
at
2.3
1096 (noting
"if
or
or
recon-
assets
or
__
(emphasis
that patent
14
tion
in
reserve
two patent
condition
in
change-of-stock-ownership condi-
licenses
suggested
its intention
nine
other patent
licenses);
not
see
___
to
also
____
Plumbers & Steamfitters Local 150 v. Vertex Constr. Co., 932 F.2d
_________________________________
__________________
unius
_____
est
___
exclusio alterius
________ ________
instructs that
when certain
matters are
intended
to be
persuade
us
excluded.").
that Pasteur
Taken together,
foresaw,
or
these provisions
reasonably should
have
would
not alter
chose
not to
its corporate
condition
legal identity,
the continued
but nonetheless
viability of
its cross-
licenses accordingly.12
____________________
12Lastly, Pasteur
misplaces
reliance upon
In re Alltech
_______________
365(c) precluded an
patent license.
discontinued
to a chapter
11
Following the
tion, Alltech
conversion of
its
to a chapter 7 liquida-
all operations
and
discharged
its
employees.
its trustee
patent license.
sive,
Noting
equity-based inquiry,
id. at
___
1813, the
fact-inten-
bankruptcy court
a different entity
bankruptcy
court
specifically
innovative rebirth of
observed
a corporate
that
shell is not
Debtor").
the
The
"attempted
analogous to
seeks to
approve the
id. at 1812.
___
sale of its
15
stock [to
with its
a third
III
III
CONCLUSION
CONCLUSION
__________
As
CBC
remains in
all
material
respects the
legal
entity with which Pasteur freely contracted, Pasteur has not made
showing that
it is or
will be
de-
appeal.
Accordingly, the
___
appellee.
________
So ordered.
So ordered.
__________
____________________
utilizing
process to
the
patented
containers, likewise
posed a
manufacture
Fluoropak, in
toxic-material
risk.
16
Id.
___