Disney Says It Has Rights To Patents Digital Domain Media Group Seeks To Sell

by Tara Arick on December 10, 2012 · 0 comments

in Bankruptcy,Patent Law

- From LexisNexis® Mealey’s™ Daily Legal News.

Walt Disney Studios Motion Picture Production on Dec. 3 filed a brief in the U.S. Bankruptcy Court for the District of Delaware objecting to bankrupt Digital Domain Media Group’s (DDMG) motion seeking approval to sell assets and contracts free and clear of all liens, contending that Disney still has patent rights (In Re: DDMG Estate, No. 12-12568, Chapter 11, D. Del. Bkcy.). DDMG filed for Chapter 11 bankruptcy on Sept. 11.

Patents

On Nov. 29, DDMG moved for authorization to sell some of its patents pertaining to special effects technology that was used on several major Hollywood films.

Disney objects, contending that DDMG’s prepetition acquisition of three patents in particular did not terminate Disney’s rights to those same patents.

While DDMG maintains that its acquisition of the patents in question was “free and clear” of the rights of any Disney entities, Disney contends that DDMG’s argument is without merit.

Disney says it was not a party to the specific transaction in which DDMG purchased the patents; therefore, it is not bound by the terms of that agreement.

Rights

Disney argues that under applicable patent law, the rights of an “exclusive” licensee to use and enforce patents are only as broad as what the grantor has the right and power to provide.

Therefore, if a party has a pre-existing ability to obtain a license from another party with a right to grant it, even if that right is to be exercised in the future, the “exclusive” licensee/assignee is subject to those rights and does not have authority to exclude the third party’s license in the patent, Disney maintains.

Furthermore, Disney contends that 11 U.S. Code Section 365(n) preserves its rights because courts generally recognize that debtors should not be allowed to use a “free and clear” sale under 11 U.S. Code Section 363(f) to “eviscerate” a licensee’s rights.

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