Seven Licensees Filed a Brief

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,

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.

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)

Signature: ______/s/ John Del Monaco Date: ______November 13, 2012

Counsel for: ______Infineon Technologies AG

______/s/ John Del Monaco ______November 13, 2012 (signature) (date)

Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements.

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)

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

______/s/ John Del Monaco ______November 13, 2012 (signature) (date)

Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements.

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:

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.

______/s/ Theodore G. Brown, III ______November 13, 2012 (signature) (date)

Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements.

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.

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

______/s/ John K. Roche ______November 13, 2012 (signature) (date)

Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements.

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.

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

______/s/ Marc Palay ______November 13, 2012 (signature) (date)

Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements.

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

Signature: ______/s/ M. Jarrad Wright Date: ______November 13, 2012

Counsel for: ______Micron Technology, Inc.

______/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

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

CERTIFICATE OF COMPLIANCE ...... 64

CERTIFICATE OF SERVICE ...... 65

iii

TABLE OF AUTHORITIES

Page(s) Cases 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

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.

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

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

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,

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

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

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.”

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.

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.

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

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.

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

§ 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

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

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 eleventh- hour 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

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

semiconductor industry and beyond, with deleterious impacts on economic productivity, competition, manufacturing, jobs, and consumer welfare. Id. at 33-

34.

Concluding that § 1506 independently prevented the removal of § 365(n), the court determined “that failure to apply § 365(n) under the circumstances of this case and this industry would ‘severely impinge’ an important statutory protection accorded licensees of U.S. patents and thereby undermine a fundamental U.S. public policy promoting technological innovation.” Id. at 34. The court noted that the legislative history of § 365(n) was “clear” that allowing bankrupt companies to terminate licenses to their patents would “impose[ ] a burden on American technological development” and that the enactment of § 365(n) was “ample evidence of the seriousness with which it viewed the ‘threat to American

Technology.’” Id. at 31 (citing legislative history).

SUMMARY OF ARGUMENT

Following an evidentiary hearing and the development of a voluminous factual record, the bankruptcy court exercised its discretion and denied Dr. Jaffé’s motion to remove the protections of § 365(n) from the Supplemental Order on two separate and independent grounds. Both grounds were fully supported by the law and the facts, and either is sufficient to affirm the ruling.

On appeal, Dr. Jaffé and the Government ignore that factual record and instead argue for a flawed and unduly limiting interpretation of Chapter 15 that would strip the bankruptcy court of all discretion and undermine the interests of foreign debtors and creditors alike. Their arguments were not properly preserved below, and are contrary to well-established law in any event.

First, as a threshold matter, both Dr. Jaffé and the Government advance arguments as to why § 365(n) cannot be applied in these proceedings. Dr. Jaffé waived these arguments by never advancing them to the bankruptcy court at the time when § 365(n) was first included in the Supplemental Order or on the first appeal to the district court. These arguments also fail on their merits. The

Government’s argument that the bankruptcy court improperly applied § 365(n) as an exception to German bankruptcy law ignores the actual record below. In fact, in response to Dr. Jaffé’s application under Chapter 15, the bankruptcy court applied § 365(n) as an exception to the U.S. bankruptcy provisions that governed

the disposition of the Qimonda estate’s U.S. patents – assets that are both creatures of U.S. law and enforceable only in U.S. courts. Dr. Jaffé’s assertion that the bankruptcy court is without discretion to grant or condition relief that he contends he never affirmatively sought is likewise incorrect. Beyond seeking recognition as a foreign representative under Chapter 15, Dr. Jaffé also sought specific relief relating to Qimonda’s U.S. patents. Dr. Jaffé sought exclusive authority under

§ 1521(b) to dispose of the U.S. patents and to distribute proceeds to the estate.

R7:31. In acting on that request, the bankruptcy court had broad discretion to condition such relief as necessary for the sufficient protection of all interested entities.

Second, the bankruptcy court did not abuse its discretion in determining, under § 1522 and based on extensive evidence, that the Licensees’ interests could not be sufficiently protected without conditioning Dr. Jaffé’s recognition and relief on the protections embodied in § 365(n). It properly found that the harm to the

Licensees outweighed any monetary risk to Dr. Jaffé or the Qimonda estate, even when taking into account Dr. Jaffé’s so-called “RAND” relicensing proposal.

R635:28-29.

Third, the bankruptcy court did not abuse its discretion in ruling that § 1506 independently precluded the removal of § 365(n), which embodies a fundamental public policy of the United States that could not otherwise be protected in this

proceeding. Dr. Jaffé’s attempt to limit the public policies protected by § 1506 is unfounded, contrary to the legislative history and purpose of § 1506 and Chapter

15 as a whole, and would render § 1506 far narrower than similar exceptions applied by other countries, including Germany. Moreover, Dr. Jaffé misstates the history and purpose of § 365(n) in arguing that its protections fall outside the scope of § 1506 under a novel “morality and justice” standard.

STANDARD OF REVIEW

The bankruptcy court’s denial of Dr. Jaffé’s motion to amend the

Supplemental Order is reviewed for abuse of discretion. In re Morris, 385 B.R.

823, 828 (E.D. Va. 2008) (“[D]ecisions committed to the discretion of the bankruptcy court are reviewed for abuse of discretion”); see also In re Robbins,

964 F.2d 342, 345 (4th Cir. 1992). This Court reviews the bankruptcy court’s legal conclusions de novo and factual findings for clear error. In re Nieves, 648 F.3d

232, 237 (4th Cir. 2011).

ARGUMENT

Chapter 15 gives bankruptcy courts “broad latitude to mold relief to meet specific circumstances.” In re Tri-Cont’l Exch. Ltd., 349 B.R. 627, 637 (Bankr.

E.D. Cal. 2006) (citing H.R. Rep. No. 109-31, at 116 (2005), reprinted in 2005

U.S.C.C.A.N. 88, 178). Dr. Jaffé and the Government each advance novel – and unsupported – interpretations of Chapter 15 that would effectively leave bankruptcy courts without the congressionally mandated “broad latitude” to respond flexibly to requests for relief and to protect the interests of both creditors and foreign debtors. The bankruptcy court, however, was well within its discretion in conditioning the relief it granted Dr. Jaffé on the protection of § 365(n) and in concluding that the required balancing of interests under § 1522 and the need to protect fundamental public policy under § 1506 independently required the application of § 365(n) here.

I. CHAPTER 15 GIVES BANKRUPTCY COURTS DISCRETION TO CONDITION A GRANT OF RELIEF TO A FOREIGN REPRESENTATIVE ON COMPLIANCE WITH § 365(n).

The Government and Dr. Jaffé advance differing arguments as to why

§ 365(n) should not have been applied in these proceedings in the first place.

Because these arguments raise a threshold issue as to whether § 365(n) can even apply here – and threaten to distract from the core issues of this appeal – the

Licensees address them at the outset. As outlined below, any argument

challenging the basic applicability of § 365, including subsection (n), has been waived. Even if considered on the merits, the arguments made by both the

Government and Dr. Jaffé also fail because they are based on flawed interpretations of Chapter 15 and the factual record.

A. Any Challenge to the Applicability of § 365(n) Has Been Waived.

Both Dr. Jaffé and the Government contend – albeit for different reasons – that the bankruptcy court erred as a matter of law when it decided in the first place to include § 365 in the Supplemental Order. All such arguments have been waived, however, and may not be considered by this Court.

Dr. Jaffé failed to object to the initial inclusion of § 365 in the Supplemental

Order or to raise that issue in the first appeal to the district court. At the outset of this Chapter 15 proceeding, the bankruptcy court included the protections of § 365, as well as other statutory provisions in the Supplemental Order – as it was fully authorized to do, see infra Sections I.B., I.C. Even when he subsequently sought to modify the Supplemental Order to remove § 365(n), Dr. Jaffé did not contest the right of the bankruptcy court to include § 365(n) relief in the Supplemental Order in the first place. Nor did he raise that argument in the first appeal to the district court. Accordingly, Dr. Jaffé’s arguments challenging the initial inclusion and basic applicability of § 365(n) have been waived and are not reviewable. United

States v. Evans, 404 F.3d 227, 236 n.5 (4th Cir. 2005) (recognizing that failure to

raise argument before trial court waives that contention on appeal); Omni Outdoor

Adver., Inc. v. Columbia Outdoor Adver., Inc., 974 F.2d 502, 505-06 (4th Cir.

1992) (where an argument could have been raised on an initial appeal, inappropriate to consider it on a second appeal following remand).

This Court also should not consider novel issues raised solely by the

Government as amicus and not by Dr. Jaffé. United States v. Buculei, 262 F.3d

322, 333 n.11 (4th Cir. 2001) (“An appellant and an amicus may not split up the issues and expect the court to consider that they have all been raised on appeal.”);

Amoco Oil Co. v. United States, 234 F.3d 1374, 1378 (Fed. Cir. 2000) (“It is the appellant’s case, not a joint appeal by the appellant and amicus. Appellant must raise in its opening brief all the issues it wishes the court to address.”). Moreover, because Dr. Jaffé failed to challenge the ability of the bankruptcy court to apply

§ 365(n) at any point in the courts below, such issues are waived on this appeal and cannot be revived by an amicus. Buculei, 262 F.3d at 333 n.11 (“An issue waived by appellant cannot be raised by amicus curiae.”).

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.

Even if this Court were to consider it on the merits, the Government’s argument fails. The Government contends that § 365(n) “cannot ‘apply’ in this case at all” because “it has no bearing on the operation of German insolvency law

in Germany.” U.S. Br. 1. That argument derives from an apparent fundamental misapprehension of the nature of the relevant Qimonda assets that are the subject of the Chapter 15 proceeding: U.S. patents governed by U.S. law and enforceable solely in U.S. courts. Because Dr. Jaffé sought to dispose of those U.S. assets, he commenced a Chapter 15 proceeding to obtain the many benefits of disposing of them under U.S. bankruptcy law. In addition to requesting recognition under

Chapter 15, Dr. Jaffé specifically requested the “discretionary relief expressly set forth in section 1521(a) and (b) of the Bankruptcy Code,” R7:31, that would allow him to oversee “the distribution of all or part of the debtor’s assets located in the

United States” as provided in 11 U.S.C. § 1521(b). Dr. Jaffé identified Qimonda’s

U.S. patents and patent applications as assets located in the United States. R7:3;

R12:3. That the assets are intangible is of no moment; they are U.S. assets governed by U.S. law, specifically 35 U.S.C. §§ 1 et seq. Dr. Jaffé also obtained the protections of the U.S. automatic stay provision, 11 U.S.C. § 362, thereby putting a stop to U.S. litigation, including patent infringement matters pending against Qimonda, and blocking licensees of the U.S. patents from filing declaratory judgment actions in U.S. courts to confirm their licensing rights.

In direct response to Dr. Jaffé’s application to proceed in the United States under Chapter 15, the bankruptcy court in the Supplemental Order listed provisions of the U.S. Bankruptcy Code that would apply in these proceedings. Those

provisions included, in its entirety, § 365 – which governs the disposition of executory contracts and unexpired leases – and therefore subsection 365(n), which gives licensees of intellectual property certain protections should a bankruptcy trustee (or foreign representative) seek to reject those licenses under other parts of

§ 365. Accordingly, in applying § 365(n) here, the bankruptcy court employed it as an exception to other applicable provisions of U.S. bankruptcy law. Contrary to the Government’s argument, U.S. Br. 16, the court did not seek to apply § 365(n)

“to constrain the operation of German insolvency law in Germany.” In fact, the bankruptcy court acknowledged that application of § 365(n) has no bearing on

Qimonda’s non-U.S. assets, including the many non-U.S. patents that are not subject to licensees’ § 365(n) rights. R635:34.

Based on its misreading of the Supplemental Order and Chapter 15 generally, the Government mistakenly contends that § 365(n) here would act as “a freestanding prohibition on the termination of intellectual-property licenses.” U.S.

Br. 18-20. It does not. As Dr. Jaffé acknowledges, nothing prohibits him from rejecting Qimonda’s U.S. license agreements. It is in the event of such a rejection that § 365(n) comes into play, acting as a safeguard for licensees who may elect to retain their rights to use the U.S. patents and applications covered by those agreements. The application of § 365 under the circumstances of this case also offered many potential benefits to Dr. Jaffé. If, for example, Qimonda had

outstanding license agreements that called for ongoing royalty payments, § 365 would have permitted Dr. Jaffé to affirm those license agreements and secure revenue for the Qimonda estate. Likewise, § 365 gave Dr. Jaffé rights that he did not have under German law, such as the ability to reject certain leases and employment contracts upon recognition.

As part of its argument that § 365(n) should not apply here, the Government asserts that this Court (and presumably the courts below) need not resolve issues regarding the Licensees’ rights now because such issues can be dealt with in the future, after a request for bankruptcy court approval of an order approving patent sales under 11 U.S.C. § 363, or in the event that the Licensees are sued for patent infringement.2 U.S. Br. 30-32. That result, however, is untenable. It would leave licensees in limbo about the fate of their licenses – in some cases for years. For example, in the present case, the sales order was not issued until March 2010, nine months after Dr. Jaffé had commenced the Chapter 15 proceeding and more than a year after the Qimonda insolvency was commenced. R254. Delaying a

2 This suggestion is especially harmful to parties such as the Licensees, which were precluded by the effect of the automatic stay granted to Dr. Jaffé from filing declaratory judgment actions against Qimonda to determine their rights promptly. The Government would relegate these companies – some of which are also located abroad – to the fate of defending patent infringement or ITC proceedings in courts around the U.S. brought years down the road by Dr. Jaffé or third-party buyers of the Qimonda patents. Needless to say, this would be neither fair nor efficient.

determination of the license rights until the time of the sales order would create prejudicial uncertainty not only for the licensees, but also for foreign representatives and the creditors – both domestic and foreign – of foreign estates.

Foreign representatives would need to try to secure buyers for their U.S. assets or establish expensive sales procedures such as auctions or other bidding mechanisms without knowing what creditor or other third-party rights or interests would be enforceable against those assets. Thus, the Government’s suggestion runs afoul of the stated purposes of Chapter 15 including the “fair and efficient administration of cross-border insolvencies,” § 1501(a)(3), and “greater legal certainty for trade and investment,” § 1501(a)(2).3

3 Although the Government asserts that determination of the license rights should wait, for example, until the time Dr. Jaffé seeks approval for the sale of patents under § 363, the Government acknowledges that Dr. Jaffé has already sought such an order here. U.S. Br. 31 n.7. The § 363 order of the bankruptcy court provided that “sales shall not be made ‘free and clear’ of any interest under Section 363(f) of the Bankruptcy Code or any other rights retained by the Objecting Parties,” but instead would be “expressly made subject” to “any licenses or other rights that may exist with respect to such patent.” R254:2-4.

Faced with that order, the Government asserts that “[t]he court did not, however, attempt to make the sale order contingent upon the Foreign Administrator’s consent to perform the patent licenses.” U.S. Br. 31 n.7. But the Government ignores that at the time of the order authorizing patent sales, the bankruptcy court had already granted Dr. Jaffé’s motion to amend the Supplemental Order and that decision was on appeal to the district court. Thus, the sales order was issued in a context in which, if the Licensees prevailed on their appeal and § 365(n) applied in this case – which is what occurred – the Licensees would have license rights that would be protected.

Finally, the Government’s acknowledgement that the licenses at issue could be protected under § 363, U.S. Br. 31, exposes the faulty logic in its position that license rights cannot be protected under § 365(n) at the start of a Chapter 15 proceeding. Section 363 provides that, upon the request of an entity with an interest in property to be used, sold, or leased, the court shall prohibit or condition the sale, use, or lease “as is necessary to provide adequate protection of such interest.” § 363(e) (emphasis added). Given that the Licensees could have sought

“adequate protection” of their license rights once a sale, use, or lease is announced under § 363(e), it makes no sense to argue that the court had no right to grant equivalent relief at the outset of the Chapter 15 proceeding when § 1521(b) – invoked by Dr. Jaffé’s request for relief – expressly states that the court must satisfy itself that the interests of creditors are “sufficiently protected.” Likewise,

§ 1522(a) states that the bankruptcy court may only grant relief sought under

§ 1519 and § 1521 if the interests of “creditors and other interested entities” are

“sufficiently protected.”

Because there is no material distinction between “adequate protection” under

§ 363 and “sufficient protection” under § 1521 and § 1522, it appears the

Government is arguing that, if the court concludes creditors and other interested parties would not be sufficiently protected if relief sought under § 1521 is granted, the bankruptcy court’s only option is to deny the recognition and the relief sought

by the foreign representative – it cannot condition the recognition and relief on provisions necessary to protect the other interested parties. Setting aside the fact that § 1522(c) expressly authorizes the court to “modify” the relief requested by a foreign representative, at the request of a creditor or “on its own motion,” the result suggested by the Government cannot be reconciled with the United Nations

Commission on International Trade Law (UNCITRAL) Model Law, the House

Report on the enactment of Chapter 15, or case law – all of which speak in terms of the bankruptcy court’s broad discretion to fashion relief that is appropriate in each case, balancing the interests of debtors, creditors, and other interested third parties. See Tri-Cont’l Exch., 349 B.R. at 636 (“Congress explained that [§ 1522] was based on Model Law Article 22 and that the bankruptcy court was being given

‘broad latitude to mold relief to meet specific circumstances.’” (quoting H.R. Rep.

No. 109-31, at 116 (2005)).4

C. Dr. Jaffé’s Assertion that § 365(n) Could Not Be Applied Because He Never Requested Relief Is Factually and Legally Incorrect.

Apart from having been waived, Dr. Jaffé’s argument that § 365(n) could not be applied here is unsupported by both the facts and the law. Dr. Jaffé argues that under § 1519 and § 1521, relief may be granted only “at the request of the

4 Chapter 15 is the U.S. version of the UNCITRAL Model Law. Article 22 of the Model Law provides that, in granting or modifying relief to the foreign representative, “the court must be satisfied that the interests of creditors and other interested persons, including the debtor, are adequately protected.”

Foreign Representative” and that he never requested inclusion of § 365(n) in the

Supplemental Order. FR Br. 56. Dr. Jaffé’s argument, however, misconstrues both his own involvement in the Chapter 15 proceedings and the operation of the

Chapter 15 statutory scheme.

As discussed above, supra Section I.B., when filing his Chapter 15 petition,

Dr. Jaffé explicitly requested “discretionary relief expressly set forth in section

1521(a) and (b) of the Bankruptcy Code” that would allow him to oversee “the distribution of all or part of the debtor’s assets located in the United States” – assets that included Qimonda’s U.S. patents and patent applications. Under

§ 1522(a), the bankruptcy court could grant the § 1521 relief requested by Dr. Jaffé only if it “sufficiently protected” the interests of all “interested entities.” To protect the Licensees’ interests, the bankruptcy court appropriately included

§ 365(n) as one of the conditions to the relief it granted Dr. Jaffé. That condition was particularly appropriate because the relief Dr. Jaffé sought included the right to oversee the distribution of Qimonda’s U.S. patent assets, and § 365(n) is necessary to protect the Licensees of those assets. See infra Section II.

Dr. Jaffé provides no authority for his apparent assertion that § 365(n) could be included only if he specifically requested it. Moreover, his argument would undermine the broad discretion given to bankruptcy courts at the core of Chapter

15. In any event, the bankruptcy court’s inclusion of § 365(n) was independently

justified by its power under § 1522(c) to modify relief granted under § 1521. Once

Dr. Jaffé requested relief under § 1521 – as he acknowledges he did – § 1522 permitted the bankruptcy court to “modify or terminate” that relief at the request of

“an entity affected” by that relief or on the bankruptcy court’s “own motion.”

Accordingly, § 365(n) could have been included as a modification to the relief granted. Consistent with the legislative history, courts have construed § 1522 to provide bankruptcy courts with “broad latitude to mold relief to meet specific circumstances.” Tri-Cont’l Exch., 349 B.R. at 637.

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.

When remanding to the bankruptcy court for an evidentiary hearing, the district court held that the “sufficient protection” standard of § 1522(a) required the bankruptcy court to “balance the relief granted to the foreign representative” against “the interests of those affected by such relief.” 10-26-Dkt.32:11 (quoting

Tri-Cont’l Exch., 349 B.R. at 637). Applying that standard and based on extensive evidence, the bankruptcy court performed the balancing of interests of the

Qimonda estate and the Licensees required by § 1522(a) and held that the “risk to the very substantial investment [the Licensees] … have collectively made in research and manufacturing facilities in the United States in reliance on the design freedom provided by the [Qimonda] cross-license agreements” was “very real” and

outweighed any monetary interest of the Qimonda estate. R635:28-29. Because removing § 365(n) protection would not sufficiently protect the Licensees’ interests, the bankruptcy court concluded that “even absent the public policy considerations” under § 1506, it would exercise its discretion by retaining the protection of § 365(n) in the Supplemental Order governing the Qimonda Chapter

15 proceeding. See id. at 29.

On appeal, Dr. Jaffé would have this Court reweigh the factual evidence, a function reserved to the bankruptcy court. This Court is reviewing a discretionary decision, and Dr. Jaffé cannot meet his heavy burden to demonstrate that the bankruptcy court abused its discretion in its application of § 1522.

A. The Bankruptcy Court Fully Considered the Interests of Both the Qimonda Estate and the Licensees.

When assessing the interests of the Qimonda estate, the bankruptcy court credited Dr. Jaffé’s testimony that retaining the protections of § 365(n) would

“result in less value … being realized by the Qimonda estate.” R635:28. The court even assumed that value to be the amount Dr. Jaffé attempted to prove at trial

($47 million). Id. (citing Dr. Jaffé’s expert). The bankruptcy court found, however, that application of § 365(n) would not deprive Qimonda’s patent portfolio of its substantial value:

Qimonda’s patent portfolio will by no means be rendered worthless. The U.S. patents can still be licensed to parties that do not already have a license, and Dr. Jaffé, to the extent

permitted by German law, will be able to fully monetize the non- U.S. patents. Application of § 365(n), moreover, imposes no affirmative burden on Dr. Jaffé.

Id.

Turning to the Licensees’ interests, the bankruptcy court concluded that, without § 365(n) protection, the Licensees would face both the immediate harm of a hold-up and the future uncertainty and destabilization of the licensing regime in the semiconductor industry.

With respect to the immediate harm of a hold-up, the bankruptcy court determined that each Licensee made a “very substantial investment … in research and manufacturing facilities in the United States in reliance on the design freedom provided by [the Qimonda] cross-license agreements.” Id. at 28-29. The bankruptcy court recognized that, in the aggregate, the Licensees had invested

in sunk-cost activities including research and development and construction of manufacturing facilities in the past five years alone – all predicated on the certainty afforded by patent cross-licenses such as those with Qimonda. Id. at 24-29; 4Tr.36-38, 92-95. The bankruptcy court concluded that, without continued rights to practice the Qimonda patents, each of the Licensees would face the immediate prospect of a hold-up in the midst of the semiconductor patent thicket. R635:33-34; see also 2Tr.218-22; 3Tr.69-72, 75, 124-27, 184, 259-60,

267-76, 282-87, 297-98; 4Tr.100-01; OX-UE ¶ 35. The Licensees have invested

massive sunk costs in designing, developing, and manufacturing their products and building production facilities, and the court recognized that the threat of an injunction against practicing the Qimonda patents would put their entire investment at risk.5 3Tr.69-72, 124-27, 259-60, 267-76, 282-87, 291-94; 4Tr.100-

01, 105; 2Tr.218-22, 232-38; OX-A ¶ 19; see also OX-A at Exs. 4-8; OX-R ¶ 92;

OX-UF ¶ 32.

The hold-up threat to the Licensees over the combined value of sunk-cost investments was not merely conjectural. Dr. Jaffé prepared claim charts purporting to show infringement of Qimonda’s U.S. patents by several Licensees and made several presentations threatening Licensees with patent infringement suits. OXs-

AH, PA, PC; 1/14/11 Dep. Tr. 268:23-269:5 (Jaffé). Dr. Jaffé also sought to sell all or part of Qimonda’s portfolio to NPEs (“patent trolls”) – patent holders that do not practice their patents but instead are in the business of bringing patent infringement litigation against legitimate manufacturers such as the Licensees.

2Tr.232-38; OX-AH; R603, Ex. 1, Federal Trade Commission, To Promote

Innovation: The Proper Balance of Competition and Patent Law and Policy (Oct.

While some district courts have doubted the availability of injunctions where the patentee has committed to license on RAND terms, the ITC has not taken that position.

2003) (hereinafter “2003 FTC Rep.”) at ELP 00224437 (“[Patent trolls] can threaten other firms with patent infringement actions, which, if successful, could inflict substantial losses, without fear of retaliation.”). Dr. Jaffé has also acted as a patent troll himself, threatening to bring patent infringement claims against the

Licensees in other federal district courts and before the ITC. 3Tr.291-94; 4Tr.100-

01, 105; 2Tr.218-22, 232-38; OX-UD ¶ 30; OX-UF ¶ 32.

As the bankruptcy court found, the hold-up threat also looms over other interested entities, including the Licensees’ customers and other Qimonda licensees and their customers. 11 U.S.C. § 1522(a); see also 10-cv-26-Dkt.32;

R635:17, 32. Dr. Jaffé has previously threatened the Licensees’ customers with infringement lawsuits and ITC actions, and those customers would be subject to hold-up if the Licensees’ license rights were not protected. See, e.g., OXs-AH,

PA, PC; 1Tr.86-89; 1/14/11 Dep. Tr. 268:23-269:5 (Jaffé); 2Tr.218-22, 225-26,

232-38; 3Tr.99-100. Indeed, after the trial in this matter, Dr. Jaffé filed a patent infringement lawsuit against a Licensee and at least two customers of Licensees.

As to the uncertainty and destabilization of the license regime in the absence of § 365(n) protection, witness after witness at trial explained that the semiconductor industry requires the design freedom and certainty obtained through patent licensing to make the massive, billion-dollar investments necessary to compete and that the termination of the licenses here would destroy that certainty.

2Tr.216, 220-25 (describing the uncertainty resulting from the cancellation of patent licenses as the “ultimate scary scenario”); 3Tr.65-66, 73, 80-81 (explaining that cancellation of a patent license would “shake the very bedrock” of the industry model); 3Tr.120-23, 126-27, 129-30, 133-36 (explaining that the “unraveling of … certainty” would be the critical harm); OX-A ¶¶ 85-86, 88; OX-R ¶ 54.

; see also R603,

Exhibit 1, 2003 FTC Rep. at ELP224482 (describing how hold-up in the semiconductor industry can “harm innovation by creating uncertainty, which affects investment decisions”). Increased uncertainty in the stability of patent licenses would necessarily lead to a reduction in investment in research and development and in new manufacturing facilities and a decrease in innovation.

3Tr.284-87; OX-A ¶¶ 85-86, 88; 4Tr.103-04; R604, Exhibit 2, Federal Trade

Commission, The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition at 77 (Mar. 2011) (hereinafter “2011 FTC Rep.”).6

6 The U.S. Federal Trade Commission (FTC) has continued to focus on the hold- up problem and its detrimental effect on innovation: If the manufacturer has sunk costs into using the technology, the patentee can use that investment as negotiating leverage for a 37

In particular, concern about future hold-ups would lead companies to engage in fewer joint development initiatives, which allow the pooling of resources and play a critical role in the development of new innovative technology. 3Tr.64-67,

80, 274-76.7 Companies would also decrease their use of and reliance on industry standards, leading to an increase in reliance on proprietary technology. 3Tr.301-

03, 311; 2Tr.231-32; OX-A ¶¶ 90-92. Standards-setting organizations promote competition by allowing for interchangeability and interoperability of products in the semiconductor industry. 3Tr.262-63, 311; OX-A ¶ 16; OX-R ¶ 40. The destruction of industry standards would increase barriers to entry and could lead to smaller or more risky semiconductor companies exiting the industry. 3Tr.301-03;

OX-A ¶¶ 90-92. The reduction of competition would in turn harm U.S. consumers, as consumer surplus would decrease because of the reduction in the

higher royalty than the patented technology could have commanded ex ante, when competing with alternatives. The increased uncertainty and higher costs associated with ex post licensing can deter innovation by manufacturers. 2011 FTC Rep. at 50. 7

interoperability of different products. 3Tr.301-03; 4Tr.14-15. This would have a further detrimental effect on innovation and on the development of new technologies. Id.

Many standards have already been set, and Qimonda has claimed that it has patents essential to those standards. In that situation, companies would be forced to choose between capitulating to a hold-up, abandoning the standard, or attempting to design around it at a significant and possibly insurmountable cost.

3Tr.270-71, 301-03; see also R603, Exhibit 1, 2003 FTC Rep. at ELP224485-86.

The uncertainty created by a failure to apply § 365(n) would negatively affect productivity, competition, manufacturing, jobs, and consumer welfare.

3Tr.308-14; 4Tr.8-10; OX-A ¶¶ 90, 91; OX-R ¶ 60; see also R603, Exhibit 1, 2003

FTC Rep. at ELP224485 (explaining how hold-ups and uncertainty in the semiconductor industry will “harm competition and innovation”). With greater uncertainty and less reliance on cross-licensing and standards, companies would have the incentive to focus on proprietary products, thereby reducing competition and raising prices. 3Tr.308-14; OX-A ¶¶ 90-92; OX-R ¶ 40. The increased uncertainty would also create incentives for licensees to move some of their manufacturing facilities outside of the United States, potentially eliminating

countless U.S. jobs and decreasing U.S. manufacturing activity. 3Tr.311-14;

4Tr.8-10; OX-A ¶ 93. Because infringement can be claimed based on products made, used, or sold in the United States, U.S. manufacturers would have incentives to move manufacturing of products that will not be used or sold in the U.S. offshore to avoid paying extortionate royalties on those products. 3Tr.311-314;

4Tr.8-10; OX-A ¶ 93. Furthermore, semiconductor products manufactured outside the U.S. either could no longer be imported into the U.S. or would be more expensive to U.S. companies (which incorporate such products in their systems) and to U.S. consumers.

B. The Bankruptcy Court Properly Recognized that Dr. Jaffé’s Offer to Relicense Did Not Change the Balance of Harms.

Dr. Jaffé claims that the bankruptcy court somehow “ignore[d] the

Insolvency Administrator’s re-licensing offer,” which he contends is “a complete response” to the harms that would befall the Licensees. FR Br. 57-58. Nothing could be further from the truth. The decision below makes clear that the bankruptcy court not only fully considered Dr. Jaffé’s supposed offer, but also properly weighed its effect on the harms to the Licensees and concluded that it did not change the result. R635:26-28. Although it noted that Dr. Jaffé’s proposal was

“not wholly unreasonable” and provided a level of “comfort against the hold-up risk,” id. at 27, the bankruptcy court nonetheless found that the Licensees would not be sufficiently protected because of the huge “sunk costs” already invested –

many billions of dollars – in reliance on the certainty afforded by the Qimonda cross-licenses. Id. at 27-28. No RAND terms could put the pieces back in place, as no Licensee could design around the Qimonda patents after years of including that technology in its products. The bankruptcy court acknowledged this plain economic reality and concluded that “the risk to the very substantial investment

[of] the objectors” outweighed the interests of Dr. Jaffé and the estate, even factoring in his proposal to relicense the patents on RAND terms.8 R635:28-29.

Dr. Jaffé’s attempts to argue that the bankruptcy court somehow undervalued his RAND proposal also fail. He does not and cannot cite to any evidentiary support for his assertion that his so-called RAND offer would eliminate the risk of a hold-up and result in a zero-sum transfer in this case. See FR Br. 47-

50. As the bankruptcy court found, no amount of RAND negotiation can correct for the fact that Dr. Jaffé is seeking royalty payments from companies that have already sunk billions of dollars into research and development and capital

8 The entire notion that a “fair and reasonable” royalty could address the issue ignores that the Licensees have already fully paid for their licenses, and therefore any second payment is, by definition, not fair and reasonable. This is also why Dr. Jaffé’s contention that he is simply seeking to change the form of the Licensees’ consideration from a cross-license to a royalty to account for the fact that Qimonda is no longer operating is a misguided red herring. The parties bargained for, and agreed to, fully paid-up, irrevocable cross-licenses. Each side provided full consideration at the time the agreements were struck, and the terms of the deal were set regardless of whether one party decided down the road it no longer required a license for whatever reason.

expenditures in reliance on their ability to use those patents in the first place. See

4Tr.33-35, 107. Because these companies no longer have the option of designing around Qimonda’s patented technology, the Licensees will be held up, regardless of any RAND undertaking. Id.

Moreover, under Dr. Jaffé’s interpretation of bankruptcy law, nothing would prevent the Licensees from being subject to the very same hold up again in the future. 3Tr.263-65, 287-88, 298-301; OX-A ¶¶ 85, 89; OX-S ¶¶ 52-53. Failing to apply § 365(n) would leave parties exposed to the cancellation of cross-licenses in the future and future hold-ups – thus further reducing the certainty, and therefore the value, that the cross-licenses provide. 2Tr.223-24; 3Tr.72-73, 75; 3Tr.129-30,

186-87, 263-65, 287-88, 298-301; OX-UD ¶ 27; OX-A ¶¶ 85, 89; OX-UF ¶ 32.

Dr. Jaffé’s presentation of the RAND proposal as an objective, easy-to- implement concept that protects all interests is also contradicted by the evidentiary record. First, commentators agree that there is no common definition of RAND, which is a “vague and ill-defined” concept. R604, Exhibit 2, 2011 FTC Rep. at

192; Mark A. Lemley, Intellectual Property Rights and Standard-Setting

Organizations, 90 Calif. L. Rev. 1889, 1906 (2002); see also 2Tr.230-31 (no industry consensus on the meaning of licensing on RAND terms). No court has directly addressed the definition of RAND. R604, Exhibit 2, 2011 FTC Rep. at

194.

Second, whether terms are truly RAND is often a hotly disputed question of fact requiring extensive discovery and litigation. See Microsoft Corp. v. Motorola,

Inc., 854 F. Supp. 2d 993, 1002-03 (W.D. Wash. 2012) (denying summary judgment and ordering a trial on dispute over whether offer was on RAND terms).

Professor Hausman testified that in his experience RAND negotiations involve a

“complex” and “extensive” process given the “myriad factors” that are disputed.

4Tr.81-82. The difficulty in determining RAND terms and conditions has led to extensive litigation in the federal and state courts.9

Third, as the bankruptcy court found, Dr. Jaffé’s offer to relicense would not protect Infineon from potentially significant indemnification claims by its cross- licensees. R635:28. The record supports that finding. 4Tr.35; 2Tr.245.

Fourth, as the FTC has determined, ex post transactions like those proposed by Dr. Jaffé are detrimental to innovation and competition. R604, Exhibit 2, 2011

FTC Rep. at 9. In particular, the uncertainty of such transactions can “deter the investment in the research, development and commercialization necessary to develop innovative products.” Id. at 53. Accordingly, even where RAND commitments apply, “there is much debate over whether such … commitments can

9 See, e.g., Proxim Inc. v. 3Com Corp., No. 1:01 Civ. 155 (D. Del., filed Mar. 8, 2001); Nokia Corp. v. Qualcomm Inc., No. 2330-N (D. Del., filed Aug. 9, 2006); Marvell Semiconductor v. CSIRO, No. 6:07 Civ. 204 (E.D. Tex., filed May 4, 2007).

effectively prevent patent owners from imposing excessive royalty obligations on licensees.” Id. at 192. If the Licensees here were forced to pay again for long- held, irrevocable patent rights, any royalty paid by the Licensees to Dr. Jaffé would be money that could not be spent on research and development, amounting effectively to a “tax on innovation” that would be passed on to consumers in the form of higher prices. 3Tr.297; 4Tr.11-14, 103-04.10

10 Dr. Jaffé’s contention that the interests protected under § 1522 are limited to “ensur[ing] that all creditors can participate in the foreign distribution on equal footing,” FR Br. 54, is without merit. Nothing in the statutory language supports that interpretation, and it is contradicted by the legislative history, which explains that § 1522 “gives the bankruptcy court broad latitude to mold relief to meet specific circumstances, including appropriate responses if it is shown that the foreign proceeding is seriously and unjustifiably injuring United States creditors.” H.R. Rep. No. 109-31(I), at 116 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 178. Equally meritless is Dr. Jaffé’s argument that application of § 365(n) would violate the “equal treatment of creditors” principle in German law. FR Br. 13. During the evidentiary hearing, Dr. Jaffé’s German bankruptcy expert conceded that there are many exceptions to the pari passu principle under German law that allow for the disparate treatment of creditors. 1Tr.113, 134-35 (C. Paulus) (testifying, among other things, that: (1) Section 47 of the German Insolvency code (“Insolvenzordnung” or “InsO”) establishes protections for Germany’s version of secured creditors and the rights of those creditors are privileged over the rights of unsecured creditors by statute; and (2) Section 103, ¶ 1 of the InsO grants the administrator the power to elect performance of contracts that have not been completely performed; i.e., he may choose which contracts he wants to perform while rejecting others).

The bankruptcy court also did not abuse its discretion when it determined that removal of § 365(n) would be “manifestly contrary to the public policy of the

United States” in violation of § 1506. Section 1506 thus provides a separate, independent basis for affirming the result below.

Unable to controvert the strong showing that § 365(n) embodies a fundamental public policy, Dr. Jaffé argues for an extreme and insupportable standard for “public policy” under § 1506, one that could be met only by policies that relate to “morality” and “justice.” Not only is that standard untenable and unfounded, but it would mean that a bankruptcy court could never apply § 1506 to protect U.S. economic public policy – no matter how fundamental or important.

A. The District Court Identified the Correct Standard Under § 1506.

Section 1506 allows a bankruptcy court to refuse to take an action that

“would be manifestly contrary to the public policy of the United States.” Framing the standard for the bankruptcy court, the district court stated that § 1506 applies where “the application of foreign law or the recognition of a foreign main proceeding under Chapter 15 would ‘severely impinge the value and import’ of a

U.S. statutory or constitutional right, such that granting comity would ‘severely hinder United States bankruptcy courts’ abilities to carry out … the most

fundamental policies and purposes’ of these rights.” 10-26-Dkt.32-32 (quoting In re Gold & Honey, Ltd., 410 B.R. 357, 372 (Bankr. E.D.N.Y. 2009)). In other words, § 1506 applies in those limited cases where (1) taking an action under foreign law conflicts with a fundamental U.S. public policy, and (2) the bankruptcy court is unable to ensure the protection of that fundamental policy in any other way. The test articulated by the district court is not merely faithful to the meaning and purpose of § 1506, but is appropriately narrow, workable, and consistent with the application of § 1506 in prior cases.

First, the legislative history supports the district court’s standard. As

Congress made clear in enacting § 1506, the “word ‘manifestly’ in international usage restricts the public policy exception to the most fundamental policies of the

United States.” H.R. Rep. No. 109-31, at 109 (2005). Congress derived § 1506 directly from the UNCITRAL Model Law and looked to the interpretation of that provision by UNCITRAL for guidance on the meaning and purpose of § 1506. Id.

The UNCITRAL Guide to Enactment, cited in the legislative history of Chapter

15, id. at 106 n.101, explains that the word “manifestly” was used to emphasize that the public policy exception is “only intended to be invoked under exceptional circumstances concerning matters of fundamental importance for the enacting

State.” UNCITRAL Model Law on Cross-Border Insolvency and Guide to

Enactment ¶ 89.

Second, the district court’s standard is consistent with the formulation of the standard by every bankruptcy court to consider the issue. See In re Vitro, S.A.B. de

C.V., 473 B.R. 117, 132-33 (Bankr. N.D. Tex. 2012); In re Sivec SRL, 476 B.R.

310, 320-26 (Bankr. E.D. Okla. 2012); In re Toft, 453 B.R. 186 (Bankr. S.D.N.Y.

2011); In re Metcalfe & Mansfield Alt. Invs., 421 B.R. 685, 697-98 (Bankr.

S.D.N.Y. 2010); In re Gold & Honey, Ltd., 410 B.R. 357 (Bankr. E.D.N.Y. 2009);

In re Ernst & Young, Inc., 383 B.R. 773, 781 (Bankr. D. Colo. 2008); In re Iida,

377 B.R. 243, 259 (B.A.P. 9th Cir. 2007); In re Ephedra Prods. Liab. Litig., 349

B.R. 333 (S.D.N.Y. 2006).

Third, the district court’s standard is appropriately narrow and workable: few policies will rise to the level of fundamental, and few actions will be so contrary to such policies to be precluded by § 1506.11 For example, courts in both

In re Ernst & Young, Inc., 383 B.R. at 781, and In re Iida, 377 B.R. at 259, declined to apply § 1506 because the alleged policy was not a fundamental U.S. public policy – the first prong of the district court’s test. By contrast, the courts in

11 The district court’s narrow standard is consistent with the view expressed by the Government of the Federal Republic of Germany in the statements of interest it submitted on October 1, 2012 and November 2, 2012. Doc. Nos. 23, 32. In its second submission, the German government clarified that it advocated for a public policy exception that would apply when foreign proceedings “are manifestly contrary to essential principles of domestic law – in this case the law of the United States.” The German government also made clear that it takes no position on whether that standard has been met on the facts of this case.

In re Ephedra, 349 B.R. at 337, and in In re Metcalfe & Mansfield, 421 B.R. at

697-98, both recognized that the action implicated a fundamental U.S. public policy but nevertheless found the second prong of the district court’s test was not satisfied because the interests embodied in the U.S. policy at issue could still be protected despite recognition of the foreign proceeding.

By contrast, in the few instances where courts have invoked § 1506, the courts found both prongs of the § 1506 standard met. In In re Gold & Honey, for example, the court denied recognition to a foreign proceeding that had been conducted in violation of the automatic stay provision of U.S. bankruptcy law. 410

B.R. at 372-73. Recognizing such a proceeding, the court concluded, “would severely impinge the value and import of the automatic stay” and “would severely hinder United States bankruptcy courts’ abilities to carry out two of the most fundamental policies and purposes of the automatic stay – namely, preventing one creditor from obtaining an advantage over other creditors, and providing for the efficient and orderly distribution of a debtor’s assets to all creditors in accordance with their relative priorities.” Id. at 372; see also In re Toft, 453 B.R. at 196-98

(invoking § 1506 and declining to defer to a foreign action that would have severely impinged on fundamental U.S. public policy regarding privacy rights); In re Vitro, 473 B.R. at 132-33 (denying comity where the foreign plan violated the absolute priority rule and would have released U.S. creditors’ claims against non-

debtor third parties); In re Sivec SRL, 476 B.R. at 320-26 (denying comity where the foreign proceeding eliminated creditors’ right to setoff and recoupment and right to vote on the plan).

Dr. Jaffé, however, seeks to overturn this long line of consistent opinions applying the same carefully-crafted standard that the district court adopted here in favor of a new and unjustifiably crabbed standard that would apply only to policies that touch on the “most basic notions of morality and justice.” FR Br. 27 (quoting

Parsons & Whittemore Overseas Co. v. Societe Generale De L’Industrie Du

Papier (RAKTA), 508 F.2d 969, 974 (2d Cir. 1974)). In the context of cross-border insolvencies, limiting § 1506 to issues of “morality and justice” would be akin to reading it out of the statute. Dr. Jaffé’s attempt to unduly limit § 1506 should be rejected.

First, Dr. Jaffé’s standard finds no support in the language, legislative history, or purpose of § 1506 or in any precedent remotely related to § 1506.

Instead, Dr. Jaffé concocts his standard from a non-bankruptcy-related Second

Circuit opinion that construes a different public policy exception from a different statutory scheme governing the enforcement of international arbitration awards.

See Parsons & Whittemore, 508 F.2d at 974 (construing the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards). The Parsons &

Whittemore court reached its interpretation based on an extensive review of

legislative history of an international treaty, not a model law, in a wholly different area of law written in a different era (decades before the enactment of Chapter 15) and serving a very different purpose. See id. at 973. Beyond this, the “morality and justice” language appeared nowhere in the legislative history or international convention containing the provision, but instead was the court’s own sui generis way of formulating “a narrow reading of the public policy defense.” Id. at 973.

Even assuming a compelling rationale for the “morality and justice” standard in the context of enforcing foreign arbitration awards, the binary decision of whether or not to recognize a foreign arbitral award is not even remotely analogous to the multiplicity of comity decisions facing a bankruptcy judge in the varied contexts that arise in Chapter 15 proceedings.

Second, Dr. Jaffé’s “morality and justice” formulation would rule out all economic public policies and is therefore inappropriate in the context of bankruptcy proceedings, which can affect fundamental economic interests and policies. Indeed, under Dr. Jaffé’s test, the court in In re Gold & Honey, for example, would have had no discretion under § 1506 to protect the fundamental

U.S. public policy embodied in the automatic stay provision – which the court explained in terms of the proper calibration of economic rights in bankruptcy. 410

B.R. at 372 (vindicating policy of “protecting one creditor from obtaining an advantage over other creditors, and providing for the efficient and orderly

distribution of a debtor’s assets to all creditors in accordance with their relative priorities”); see also In re Vitro, 473 B.R. at 132-33 (same).

Third, Dr. Jaffé’s “morality and justice” standard is inconsistent with how foreign courts have applied principles of comity to U.S. bankruptcy court proceedings. German courts have refused to defer to U.S. law when deciding to protect a broad range of rights, including those as common as rights to employment.12 See Bundesarbeitsgericht [Federal Labor Court] Feb. 27, 2007, No.

3 AZR 619/06 (Ger.). There, the German Federal Labor Court refused to apply the automatic stay applicable to U.S. bankruptcy proceedings, finding that such an action would violate the German public policy that protects the continued existence of individual employment contracts in insolvency proceedings. Id. ¶ 35.

Similarly, German courts have held that U.S. judgments granting punitive damages are not enforceable in Germany as against public policy. See Bundesgerichtshof

[Federal Court of Justice] June 4, 1992, No. IX ZR 149/9 (Ger.). Thus, even

Germany recognizes that economic policies can be fundamental public policy overriding pleas for comity.

12 Germany has not even adopted the UNCITRAL Model Law on Cross-Border Insolvencies – a fact that is hard to reconcile with the notion advanced by Dr. Jaffé that the U.S., which has adopted UNCITRAL, would be an outlier in the world of international insolvency law if U.S. courts do not defer to German law in this circumstance.

Courts in the United Kingdom, another main ally and trading partner, have similarly refused to defer to foreign judgments where recognition would undermine the United Kingdom’s long-standing legal protections. For example, in

Rubin v. Eurofinance SA, [2012] U.K.S.C. 46 (U.K.), the United Kingdom

Supreme Court recently refused to recognize a $10 million judgment entered against a Canadian national in the United States Bankruptcy Court for the Southern

District of New York. The court refused to recognize the judgment because the defendant, a Canadian, had not consented to the jurisdiction of the U.S. bankruptcy court, which the court found contravened U.K. law, which provides that U.K. courts may refuse to enforce judgments – including judgments entered in bankruptcy and insolvency proceedings – against a non-resident defendant who does not consent to a foreign court’s jurisdiction.

B. Under the Proper § 1506 Standard, the Bankruptcy Court’s Refusal to Remove § 365(n) Was Not an Abuse of Discretion.

Based on the legislative history of § 365(n) and the record evidence, the bankruptcy court found that “failure to apply § 365(n) under the circumstances of this case and this industry would ‘severely impinge’” on the important protections embodied in § 365(n) and thus “undermine a fundamental U.S. public policy promoting technological innovation.” R635:34. Those findings were amply supported, and the bankruptcy court’s rejection of Dr. Jaffé’s motion to remove

§ 365(n) was not an abuse of discretion.

1. Section 365(n) Embodies a Fundamental Public Policy of the United States.

As the bankruptcy court recognized, “[t]hat the right of a non-bankrupt licensee to continue using a patent license was deemed by Congress to be of great public importance can scarcely be doubted.” Id. at 31 (emphasis in original). On that point, “the legislative history is clear” that without such a right, Congress believed that “American technological development” would be burdened. Id. The

“alacrity with which Congress acted” to overturn the Lubrizol decision “is ample evidence of the seriousness with which it viewed the ‘threat to American

Technology.’”13 Id.

The bankruptcy court’s interpretation of § 365(n)’s history is beyond dispute. In adopting § 365(n), Congress made clear not only that the provision was consistent with § 365 as historically understood, but also that the principle embodied in § 365(n) represents a fundamental U.S. policy. Congress explained that allowing the termination of patent license rights in bankruptcy proceedings

13 Congress passed § 365(n) in direct response to the decision in Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985), which concerned whether an insolvent party should be allowed to reject an executory technology licensing agreement. In holding that the insolvent party could reject that technology licensing agreement because it was in its business interests, the Lubrizol court recognized the “obvious adverse consequences for contracting parties.” Id. at 1048. The court thus explained that “allowing rejection in this and comparable cases could have a general chilling effect upon the willingness of such parties to contract at all with businesses in possible financial difficulty.” Id. at 1048.

would “threaten the very flexible and beneficial system of intellectual property licensing which has developed in the United States” and “threaten an end to the system of licensing of intellectual property … that has evolved over many years to the mutual benefit of both the licensor and the licensee and to the country’s indirect benefits.” S. Rep. No. 100-505, at 3 (1988). According to Congress, “[i]t is not an overstatement to say that the change is a fundamental threat to the creative process that has nurtured innovation in the United States.” Id.

As Congress recognized when it adopted § 365(n), “[l]icensing of technology, which the bill is intended to protect and to facilitate, plays a substantial role in the process of technological development and innovation.” S. Rep. No.

100-505, at 3; see also Peter S. Menell, Bankruptcy Treatment of Intellectual

Property Assets: An Economic Analysis, 22 Berkeley Tech. L.J. 733, 737 (2007)

(“Much of the value of intellectual property flows from licensing goods and services. Freedom of contract therefore plays a central role in maximizing the potential value of intellectual property by encouraging a robust licensing market to exploit the value of intellectual creativity.”).

The U.S. is not alone in recognizing the importance of the protection embodied in § 365(n). Indeed, UNCITRAL, in its Legislative Guide on Insolvency

Law, specifically noted that “[e]xceptions to the power to reject may also be appropriate in the case of … agreements where the debtor is a … licensor of

intellectual property and termination of the agreement would end or seriously affect the business of the counterparty.” UNCITRAL Legislative Guide on

Insolvency Law ¶ 143. To the extent that Germany allows the termination of license rights to intellectual property in bankruptcy (and it is now becoming clear that Germany may not recognize these effects of rejection), Germany’s position puts it in the minority among countries having the largest economies in the world, and declining to defer to German law would hardly undermine aims of international harmony.14

14 Dr. Jaffé argued below that, unlike U.S. law, German law allows the rejection of intellectual property license rights in bankruptcy. That supposed difference in German law was the cornerstone of Dr. Jaffé’s argument for the removal of § 365(n). Although the Licensees did not accept Dr. Jaffé’s contention that German law was so clear, the bankruptcy court and district court both assumed, without making any definitive finding, that German law was at odds with U.S. law on this point. Dr. Jaffé’s position on German law, however, has been rejected by German courts, which have recently found that German law may not treat rights to intellectual property licenses differently than U.S. law. Notably, just this year and after the bankruptcy court’s decision below, a German trial court addressed this very case under German law and held that Infineon’s licenses and its sub- licenses to Qimonda’s patents could not be cancelled by Dr. Jaffé under German bankruptcy law because of the irrevocable and unrestricted nature of the licenses. Landgericht [Regional Court] Munich I, Feb. 9, 2012, Case No. 7 O 1906/11 (Ger.); see also Landgericht [Regional Court] Munich I, June 13, 2007, Case No. 21 0 23532/06 (Ger.) (concerning trademark licenses). Other courts, including the Bundesgerichtshof [German Federal Court of Justice], have opined that certain intellectual property licenses have in rem character. Landgericht [Regional Court] Mannheim, Feb. 18, 2011, Case No. 7 O 100/10 (Ger.) (concerning patent licenses); Bundesgerichtshof [Federal Court of Justice], Mar. 26, 2009, Case No. I ZR 153/06 (Ger.) (Tyres Progressive) 55

Each of Dr. Jaffé’s attempts to disprove the fundamental importance of

§ 365(n) falls short. First, Dr. Jaffé argues that § 365(n) cannot be fundamental because it is not automatically applicable upon recognition of a Chapter 15 proceeding. FR Br. 40. But there is no requirement that a fundamental U.S. public policy be listed as a provision that automatically applies in every Chapter 15 proceeding. In fact, it makes sense that § 365(n), though it embodies fundamental

U.S. public policy, is not automatically applied in Chapter 15 proceedings because it “is not routinely implicated in every bankruptcy.” 10-26-Dkt. 32:18. Thus,

“Congress sensibly left the application of § 365(n) to the discretion of bankruptcy courts, where appropriate.” Id. Commentators agree that there is no relationship between whether a provision is made mandatory and whether it embodies a fundamental U.S. public policy. 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, 219-20 (2011) (listing, in addition to § 365(n), non-mandatory statutory provisions 11 U.S.C. § 541 and 28

U.S.C. § 1334 as embodying fundamental U.S. public policy).

(concerning copyright licenses); Bundesgerichtshof [Federal Court of Justice], Apr. 29, 2010, Case No. I ZR 69/08 (Ger.) (Thumbnails) (concerning copyright licenses). It follows that the insolvent licensor cannot cancel such licenses because, under German insolvency law, in rem rights that have been granted to a creditor before the commencement of insolvency proceedings are no longer part of the insolvent estate.

Second, Dr. Jaffé contends that § 365(n) represents “a recently enacted exception to principles of equality embodied in § 365 as a whole.” FR Br. 35.

That is incorrect. The protections embodied in § 365(n) are not new. Congress made clear when it enacted § 365(n) that Lubrizol and other “court decisions interpreting Section 365 have imposed a burden on American technological development that was never intended by Congress in enacting Section 365.” S.

Rep. No. 100-505, at 1-2. Congress explained that adoption of § 365(n) was intended to “immediately remove that burden and its attendant threat to the development of American Technology and will further clarify that Congress never intended for Section 365 to be so applied.” Id. at 2. Congress intended § 365(n) as a clarification of the law rather than a change in the law: “The bill corrects the perception of some courts that Section 365 was ever intended to be a mechanism for stripping innocent licensee[s] of rights central to the operations of their ongoing business and stripping the American licensing system of its dependability and flexibility.” Id. at 4. Accordingly, contrary to the premise of Dr. Jaffé’s argument, the cancellation of intellectual property licenses in bankruptcy was never part of

American law, even before the enactment of § 365(n). That provision was not a departure from but a reassertion of the longstanding rule.15

15 The Seventh Circuit recently held that Lubrizol was wrongly decided, and that § 365(n) at the time of Lubrizol protected license rights to intellectual property. 57

Third, Dr. Jaffé attempts to downplay § 365(n) as nothing more than a

“special interest exception.” FR Br. 39 (citing H.R. Rep. No. 100-1012 (1988)).

That contention is based on a misreading of the legislative history. In context,

Congress used the term “special interest exception” to refer to the structure of

§ 365, not to the substance of the individual protection:

The Committee agrees … that in the long run, section 365 and the treatment of executory contracts and unexpired leases in the bankruptcy laws should be revisited as a whole and fashioned so as to apply consistently in all situations. The Committee believes that continued creation of special interest exceptions to section 365 is not desirable, and intends to revisit and rework section 365 as necessary so that it is, in Mr. Hahn’s words, a “total cohesive section.”

H.R. Rep. No. 100-1012, at 3 (footnotes omitted). Congress expected that § 365 could be restructured so that it would be a cohesive whole, without the need for statutory “exceptions” like § 365(n). Congress saw § 365(n) not as an exception to a general rule but as defining the scope of the intended rule.

Fourth, Dr. Jaffé makes the conclusory assertion that “withdrawing someone’s right to practice another’s invention is not an intolerable injustice.” FR

Br. 34 (citing Evans v. Jordan, 13 U.S. 199 (1815)). In making that argument, not only does Dr. Jaffé ignore Congress’s clear statements to the contrary, he has to reach back nearly 200 years to find any case that will support such a proposition.

Sunbeam Prods., Inc. v. Chicago Am. Mfg., LLC, 686 F.3d 372, 376-78 (7th Cir. 2012).

And even the case Dr. Jaffé cites actually supports the Licensees’ position in the context of licensees, as it expressly recognized that the law at issue exempted those

“who had paid [the patentee] for a license” prior to the patentee’s extension of his patent rights. Evans, 13 U.S. at 203.

Fifth, Dr. Jaffé argues that the Licensees should have foreseen at the time that they entered into their license agreements with Qimonda the application of

German law to a potential Qimonda insolvency. FR Br. 34.

Even putting those provisions aside, the Licensees properly expected under general principles of international comity that rights to the U.S. patents would be governed by U.S. law, not German law. When deciding whether to defer to another country’s law, courts consider “the link of the activity to the territory of the regulating state” and “the existence of justified expectations that might be protected or hurt by the regulation.” Restatement (Third) of Foreign Relations

Law § 403 (1987); see also In re French, 440 F.3d 145, 153 (4th Cir. 2006) (noting

the § 403 factors). U.S. patents are uniquely tied to U.S. territory as they are issued by the U.S. government, governed by U.S. law, and enforceable only in U.S. courts. As Dr. Jaffé acknowledges, § 365(n) does not apply to foreign patents. FR

Br. 39.

Finally, Dr. Jaffé contends that his purported RAND relicensing offer somehow minimizes the impingement on the fundamental public policy at stake.

As set forth above, that proposal does not and cannot obviate the harm that

§ 365(n) aims to prevent and therefore does not cure the offense to fundamental

U.S. policy. See supra Section II.B. More fundamentally, the bankruptcy court expressly considered Dr. Jaffé’s RAND relicensing offer and found that it does not prevent the uncertainty that would slow the pace of innovation in this country.

2. Removal of § 365(n) Protection Would Undermine the Fundamental U.S. Public Policy of Promoting Innovation.

Having determined that § 365(n) embodies a fundamental U.S. public policy, the bankruptcy court then found that failure to apply § 365(n) on the facts of this case would result in the severe impingement of the protection of § 365(n) and the undermining of the fundamental U.S. public policy of promoting technological innovation. R635:34. That determination was based on factual findings that were amply supported by record evidence.

The court found that “the threat that a licensee, having already paid once, might have to pay a second time on ‘hold up’ terms in order to continue practicing

the licensed patent, would discourage the kind of heavy investment, not only in research and development, but more importantly in construction of manufacturing facilities, that are required in the semiconductor industry.” Id. at 32. That

“resulting uncertainty” would lead to less innovation, slowing “the pace of innovation, to the detriment of the U.S. economy.” Id. at 34.

CONCLUSION AND REQUEST FOR ORAL ARGUMENT

For the reasons above, the bankruptcy court’s determinations do not constitute an abuse of discretion. The bankruptcy court properly applied § 1522 and § 1506, finding two independent grounds for denying Dr. Jaffé’s request to remove the protection of § 365(n) from Qimonda’s Chapter 15 proceedings. This

Court need only affirm on one ground to affirm the judgment below.

The Licensees respectfully request oral argument. This case has broad and significant implications affecting the rights of intellectual property owners and

American innovation. This case presents complex issues of law and fact.

November 13, 2012

Respectfully submitted,

/s/ Stephen E. Leach Marc Palay LEACH TRAVELL BRITT, P.C. SIDLEY AUSTIN LLP 8270 Greensboro Drive, Suite 700 Rue de Lausanne 139 Sixth Floor Tysons Corner, VA 22102 1201 Geneva (703) 584-8902 41.22.308.00.00

William H. Pratt Jonathan Cohn Jennifer M. Selendy SIDLEY AUSTIN LLP John P. Del Monaco 1501 K Street, N.W. KIRKLAND & ELLIS LLP Washington, DC 20005 601 Lexington Avenue (202) 736-8041 New York, NY 10022-4611 (212) 446-4800 Counsel for Nanya Technology Corp.

Timothy Muris Lawrence A. Katz, Esquire Daniel A. Bress LEACH TRAVELL BRITT, P.C. KIRKLAND & ELLIS LLP 8270 Greensboro Drive, Suite 700 655 Fifteenth Street, N.W. Tysons Corner, VA 22102 Washington, DC 20005-5793 (703) 584-8362 (202) 879-5000 Theodore G. Brown, III William E. Devitt KILPATRICK TOWNSEND & Dennis J. Abdelnour STOCKTON LLP KIRKLAND & ELLIS LLP 1080 Marsh Road 300 North LaSalle Menlo Park, CA 94025 Chicago, IL 60654 (650) 324-6353 Telephone: (312) 862-2000 Counsel for SK hynix Inc. Co-Counsel Samsung Electronics Co., Ltd., Infineon Technologies AG, and IBM Corporation 62

M. Jarrad Wright Joseph E. Mais Adam P. Strochak Timothy J. Franks WEIL, GOTSHAL & MANGES LLP PERKINS COIE LLP 1300 Eye Street, NW, Suite 900 2901 N. Central Avenue Washington, DC 20005 Suite 2000 (202) 682-7000 Phoenix, AZ 85012 (602) 351-8000 Alfredo R. Perez WEIL, GOTSHAL & MANGES LLP John K. Roche 700 Louisiana Street, Suite 1600 PERKINS COIE LLP Houston, TX 77002 700 Thirteenth Street N.W. (713) 546-5000 Washington, DC 20005-3960 (202) 434-1627 Maurice Horwitz WEIL, GOTSHAL & MANGES LLP Alan D. Smith 767 Fifth Avenue PERKINS COIE LLP New York, New York 10153 1201 Third Avenue, Suite 4800 (212) 310-8000 Seattle, WA 98101 (206) 359-8000 Jared Bobrow WEIL, GOTSHAL & MANGES LLP Counsel for Intel Corporation

201 Redwood Shores Parkway Redwood Shores, CA 94065 (650) 802-3000

Counsel for Micron Technology, Inc.

CERTIFICATE OF COMPLIANCE

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Dated: November 13, 2012 /s/ John P. Del Monaco

John P. Del Monaco KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, NY 10022-4611 (212) 446-4800

Counsel for Samsung Electronics Co., Ltd., Infineon Technologies AG, and IBM Corporation

CERTIFICATE OF SERVICE

I hereby certify that on November 13, 2012, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF System, and caused a copy to be served electronically via e-mail on all counsel of record.

/s/ John P. Del Monaco

John P. Del Monaco KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, NY 10022-4611 (212) 446-4800

Counsel for Samsung Electronics Co., Ltd., Infineon Technologies AG, and IBM Corporation