Published United States Court of Appeals for The

PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-1802 MICHAEL JAFFÉ, Insolvency Administrator, Plaintiff - Appellant, v. SAMSUNG ELECTRONICS COMPANY, LIMITED; INFINEON TECHNOLOGIES AG; INTERNATIONAL BUSINESS MACHINES CORPORATION; HYNIX SEMICONDUCTOR, INC.; INTEL CORPORATION; NANYA TECHNOLOGY CORPORATION; MICRON TECHNOLOGY, Defendants - Appellees. ------------------------------ UNITED STATES OF AMERICA, Amicus Curiae, VERBAND INSOLVENZVERWALTER DEUTSCHLANDS E.V., Amicus Supporting Appellant, THE FEDERATION OF GERMAN INDUSTRIES, a/k/a Bundesverband der Deutschen Industrie; INTELLECTUAL PROPERTY OWNERS ASSOCIATION; SEMICONDUCTOR INDUSTRY ASSOCIATION; CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA; NATIONAL ASSOCIATION OF MANUFACTURERS; BUSINESS SOFTWARE ALLIANCE, Amici Supporting Appellees. Appeal from the United States Bankruptcy Court for the Eastern District of Virginia, at Alexandria. Stephen S. Mitchell, Bankruptcy Judge. (09-14766-RGM) Argued: September 17, 2013 Decided: December 3, 2013 Before NIEMEYER, WYNN, and FLOYD, Circuit Judges. Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Judge Floyd joined. Judge Wynn wrote a separate opinion concurring in Parts I, II, and III and the judgment. ARGUED: Jeffrey A. Lamken, MOLOLAMKEN LLP, Washington, D.C., for Appellant. William H. Pratt, KIRKLAND & ELLIS LLP, New York, New York, for Appellees. Mark R. Freeman, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae the United States of America. ON BRIEF: Robert K. Kry, MOLOLAMKEN LLP, Washington, D.C., for Appellant. Jennifer M. Selendy, John P. Del Monaco, New York, New York, Timothy Muris, Daniel A. Bress, Washington, D.C., William E. Devitt, Dennis J. Abdelnour, KIRKLAND & ELLIS LLP, Chicago, Illinois; Stephen E. Leach, LEACH TRAVELL BRITT, P.C., Tysons Corner, Virginia, for Appellees Infineon Technologies AG, Samsung Electronics Company, Limited, and International Business Machines Corporation. Lawrence A. Katz, LEACH TRAVELL BRITT, P.C., Tysons Corner, Virginia; Theodore G. Brown, III, KILPATRICK TOWNSEND & STOCKTON LLP, Menlo Park, California, for Appellee Hynix Semiconductor, Inc. Joseph E. Mais, Timothy J. Franks, Phoenix, Arizona, John K. Roche, Washington, D.C., Alan D. Smith, PERKINS COIE LLP, Seattle, Washington, for Appellee Intel Corporation. Marc Palay, Geneva, Switzerland, Jonathan Cohn, SIDLEY AUSTIN LLP, Washington, D.C., for Appellee Nanya Technology Corporation. Maurice Horwitz, New York, New York, M. Jarrad Wright, Adam P. Strochak, Washington, D.C., Alfredo R. Perez, Houston, Texas, Jared Bobrow, WEIL, GOTSHAL & MANGES LLP, Redwood Shores, California, for Appellee Micron Technology. Christopher J. Wright, Timothy J. Simeone, WILTSHIRE & GRANNIS, LLP, Washington, D.C., for Amicus Verband Insolvenzverwalter Deutschlands E.V. Neil H. MacBride, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia; Stuart F. Delery, Acting Assistant Attorney General, Robert M. Loeb, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae the United States of America. Richard F. Phillips, Kevin H. Rhodes, INTELLECTUAL PROPERTY OWNERS ASSOCIATION, Washington, D.C.; Jeffrey K. Sherwood, Gary M. Hoffman, Megan S. Woodworth, DICKSTEIN SHAPIRO LLP, Washington, D.C., for Amicus Intellectual Property Owners 2 Association. Timothy J. Coleman, FRESHFIELDS BRUCKHAUS DERINGER LLP, Washington, D.C., for Amicus Federation of German Industries. David Isaacs, SEMICONDUCTOR INDUSTRY ASSOCIATION, Washington, D.C., for Amicus Semiconductor Industry Association; Paul D. Clement, D. Zachary Hudson, BANCROFT PLLC, Washington, D.C., for Amici Semiconductor Industry Association, Chamber of Commerce of the United States of America, National Association of Manufacturers, and Business Software Alliance; Robin S. Conrad, NATIONAL CHAMBER LITIGATION CENTER, Washington, D.C., for Amicus Chamber of Commerce of the United States of America; Quentin Riegel, NATIONAL ASSOCIATION OF MANUFACTURERS, Washington, D.C., for Amicus National Association of Manufacturers; Timothy A. Molino, BSA/THE SOFTWARE ALLIANCE, Washington, D.C., for Amicus Business Software Alliance. 3 NIEMEYER, Circuit Judge: This appeal presents the significant question under Chapter 15 of the U.S. Bankruptcy Code of how to mediate between the United States’ interests in recognizing and cooperating with a foreign insolvency proceeding and its interests in protecting creditors of the foreign debtor with respect to U.S. assets, as provided in 11 U.S.C. §§ 1521 and 1522. Qimonda AG, a German corporation that manufactured semiconductor devices and was, for a brief time, one of the world’s largest manufacturers of dynamic random access memory (“DRAM”), filed for insolvency in Munich, Germany, in January 2009. The principal assets of Qimonda’s estate consisted of some 10,000 patents, about 4,000 of which were U.S. patents. These patents were subject to cross-license agreements with Qimonda’s competitors, as was common in the semiconductor industry to avoid infringement risks caused by the “patent thicket” resulting from the overlapping patent rights of some 420,000 patents in the semiconductor industry. Ancillary to the German insolvency proceeding, Dr. Michael Jaffé, the insolvency administrator appointed by the Munich court, filed an application in the Bankruptcy Court for the Eastern District of Virginia under Chapter 15 of the U.S. Bankruptcy Code, petitioning the U.S. court to recognize the German insolvency proceeding as a “foreign main proceeding” in 4 order to obtain an array of privileges available under Chapter 15. Among other relief, Jaffé specifically requested that the bankruptcy court entrust to him, pursuant to 11 U.S.C. § 1521(a)(5), the administration of all of Qimonda’s assets within the territorial jurisdiction of the United States, which largely consisted of the 4,000 U.S. patents. Contemporaneously with the Chapter 15 proceeding, Jaffé sent letters to licensees of Qimonda’s patents under its cross- license agreements, declaring that, under § 103 of the German Insolvency Code, the licenses granted under Qimonda patents “are no longer enforceable,” including the licenses under the company’s 4,000 U.S. patents. As Jaffé later indicated to the bankruptcy court, he intended to re-license Qimonda’s patents for the benefit of Qimonda’s creditors, replacing licenses paid for in-kind with cross-licenses with licenses paid for with cash through royalties. The bankruptcy court entered an order recognizing the German insolvency proceeding as a foreign main proceeding and a separate order granting Jaffé the discretionary relief he requested under § 1521(a)(5). But, following a four-day evidentiary hearing, it conditioned the § 1521 relief with the requirement that Jaffé afford the licensees of Qimonda’s U.S. patents the treatment they would have received in the United States under 11 U.S.C. § 365(n), which limits a trustee’s 5 ability to reject unilaterally licenses to the debtor’s intellectual property by giving licensees the option to retain their rights under the licenses. After balancing the interests of Qimonda’s estate with the interests of the licensees of its U.S. patents, the bankruptcy court concluded that the application of § 365(n) was necessary to ensure, as required by § 1522(a), that the licensees were “sufficiently protected,” even though it would adversely affect Qimonda’s estate. The bankruptcy court also concluded, pursuant to 11 U.S.C. § 1506, that allowing Jaffé to cancel unilaterally Qimonda’s licenses of U.S. patents “would be manifestly contrary to the public policy of the United States,” recognizing “a fundamental U.S. public policy promoting technological innovation,” which would be undermined if it failed to apply § 365(n) to the licenses under Qimonda’s U.S. patents. In this direct appeal from the bankruptcy court, Jaffé challenges both of these conclusions, arguing that the court erred in its construction of Chapter 15 and abused its discretion in applying it. We conclude that the bankruptcy court properly recognized that Jaffé’s request for discretionary relief under § 1521(a) required it to consider “the interests of the creditors and other interested entities, including the debtor” under § 1522(a) and that it properly construed § 1522(a) as requiring the 6 application of a balancing test. Moreover, relying on the particular facts of this case and the extensive record developed during the four-day evidentiary hearing, we also conclude that the bankruptcy court reasonably exercised its discretion in balancing the interests of the licensees against the interests of the debtor and finding that application of § 365(n) was necessary to ensure the licensees under Qimonda’s U.S. patents were sufficiently protected. Accordingly, we affirm. I The German insolvency proceeding Qimonda AG filed an application to open a preliminary insolvency proceeding in the Munich Insolvency Court on January 23, 2009, which was converted to a final proceeding on April 1, 2009. Upon converting the proceeding to a final one, the court appointed Dr. Michael Jaffé to serve as the estate’s insolvency administrator, a position akin to a bankruptcy trustee under U.S. law. Subsequently, Qimonda ceased all manufacturing operations and began to liquidate its estate. The principal assets of the estate consisted of its approximately 10,000 patents, including about 4,000 U.S. patents. Most of these patents covered products or processes related to DRAM, but some covered

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