Team R46

No. 13-628

IN THE

Supreme Court of the United States

October Term, 2013

IN RE FOODSTAR, INC.,

Debtor,

FOODSTAR, INC.,

Petitioner,

v.

RAVI VOHRA,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Thirteenth Circuit

BRIEF FOR RESPONDENT

Team R46

Counsel for Respondent

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QUESTIONS PRESENTED

I. Does Section 365 of the Bankruptcy Code permit a licensor-debtor to unilaterally strip a

licensee of its fairly procured trademark rights through rejection of a licensing

agreement?

II. Does the longstanding presumption against extraterritorial application of federal law

permit the extension of Bankruptcy Code Section 365 to a foreign licensing agreement

that has no connection to the United States other than the fact that the debtor is a party to

it?

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TABLE OF CONTENTS

Questions Presented………………………………………………………………………………i

Table of Contents………………………………………………………………………………...ii

Table of Authorities……………………………………………………………………………...v

Opinions Below…………………………………………………………………………………..x

Statement of Jurisdiction………………………………………………………………………..x

Statutory Provisions..……………………………………………………………………………x

Statement of Facts…..…………………………………………………………………………...1

Summary of the Argument……………………………………………………………...………4

Argument…………………………………………………………………….…………...………5

I. UNDER § 365 OF THE CODE, REJECTION OF A TRADEMARK LICENSING

AGREEMENT DOES NOT UNILATERALLY TERMINATE VOHRA’S FAIRLY

PROCURED TRADEMARK RIGHTS. ……………….………………………………5

A. Under § 365, the effect of a rejection does not terminate Vohra’s exclusive rights

to use the trademark. ……………………………………………….……………..6

B. Under § 365(n), Congress’ choice to provide distinct treatment for some

intellectual property is not indicative of the proper treatment for trademarks.…...7

1. The omission of trademarks under § 365(n) should not preclude

trademarks from protection given Congress’s intent and the prior role of

trademark licensing agreements. ………………………..………………7

2. Even if trademarks are construed as distinct from the intellectual

property protected under § 365, this Court should permit specific

performance since the Code does not provide otherwise. ……..………..9

3. Allowing the unilateral termination of a trademark licensee’s legitimate

rights will cause a chilling effect on future trademark licensing

agreements. ………………………………………….………………...10

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C. Unilaterally terminating Vohra’s legitimate trademark rights is

inequitable.……………………………………………………………….………12

1. This Court should exercise equitable treatment in considering issues

rooted in bankruptcy.…………………………………………………..12

2. When the licensee’s continued rights under the licensing agreement do

not completely hinder the debtor’s ability to sell or license its trademark,

termination is inappropriate.………………..………………………….13

II. EVEN IF TRADEMARKS ARE NOT AFFORDED PROTECTION UNDER § 365,

THE PRESUMPTION AGAINST EXTRATERRITORIALITY BARS THE

EXTRATERRITORIAL APPLICATION OF § 365 TO A FOREIGN LICENSING

AGREEMENT. ………………………………………………..………………………14

A. The language, legislative history, and statutory scheme of the Code do not express

an unambiguously clear statement of intent to apply § 365 extraterritorially…...16

1. Section 1334(e)(1) does not squarely address extraterritorial intent…..16

2. The language of § 541(a) is too ambiguous to rely upon for a clear

expression of extraterritorial intent…………………………………….17

3. The Code’s legislative history does not overcome a strict application of

the presumption against extraterritoriality……..………………………20

4. The overall statutory scheme of the Code is not indicative of intent to

apply § 365 extraterritorially…………………………………………..21

B. Comity considerations weigh heavily against applying § 365 to a foreign licensing

agreement with no connection to the United States besides the licensor’s pending

bankruptcy case……………………………………...…………………………...22

C. Even if this Court adopts a broad interpretation of § 541(a), the extraterritorial

application of § 365 would be improper because the U.S. lacks personal

jurisdiction over Vohra…………………………………..………………………25

Conclusion………………………………………………………………………………………30

Appendix A: 11 U.S.C. § 101…………………………………………………………..………A

Appendix B: 11 U.S.C. § 362…………………………………………………………..………B

Appendix C: 11 U.S.C. § 365…………………………………………………………..………C

Appendix D: 11 U.S.C. § 502…………………………………………………………………..D

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Appendix E: 11 U.S.C. § 541……………………………………………………………………E

Appendix F: 11 U.S.C. § 1501…………………………………………………………...………F

Appendix G: 11 U.S.C. § 1525………………………………………………………….………G

Appendix H: 28 U.S.C. § 1334………………………………………………………….………H

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TABLE OF AUTHORITIES

United States Supreme Court Cases

Am. Banana Co. v. United Fruit Co.,

213 U.S. 347 (1909)……………………………………………………………………...………19

Benz v. Compania Naviera Hidalgo, S.A.,

353 U.S. 138 (1957) ……………………………………………………………………..………23

Burger King Corp. v. Rudzewicz,

471 U.S. 462 (1985)……………………………………………………………………...………28

Butner v. United States,

440 U.S. 48 (1979)……………………………………………………………………….………10

E.E.O.C. v. American Arab Oil Co.,

499 U.S. 244 (1991)………………………………………………….14, 15, 18, 19, 21, 22, 23, 25

F. Hoffmann-La Roche Ltd. v. Empagran S.A.,

542 U.S. 155 (2004)……………………………………………………………………...…..22, 23

Foley Bros., Inc. v. Filardo,

336 U.S. 281 (1949)……………………………………………………………………...………14

Great-W. Life & Annuity Ins. Co. v. Knudson,

534 U.S. 204 (2002)……………………………………………………………………..………26

Hanson v. Denckla,

357 U.S. 235 (1958)……………………………………………………………………..………28

Hartford Fire Ins. Co. v. California,

509 U.S. 764 (1993)……………………………………………………………………..………23

International Shoe Co. v. Washington,

326 U.S. 310 (1945)……………………………………………………………...…………..27, 28

Kiobel v. Royal Dutch Petroleum Co.,

___U.S.___, 133 S.Ct. 1659 (2013)………………………………………….…………..17, 18, 24

McCulloch v. Sociedad Nacional de Marineros de Honduras,

372 U.S. 10 (1963)……………………………………………………………….………22, 23, 25

Microsoft Corp. v. AT&T Corp.,

550 U.S. 437 (2007)………………………………………………………………….………15, 22

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Morrison v. Nat’l Australia Bank Ltd.,

561 U.S. 247, 130 S.Ct. 2869 (2010)………………………………………...…………..17, 19, 22

New York Central R. Co. v. Chisholm,

268 U.S. 29 (1925)……………………………………………………………………….………18

Pierce v. Underwood,

487 U.S. 552 (1988)……………………………………………………………………….………5

Sale v. Haitian Ctrs. Council, Inc.,

509 U.S. 155 (1993)………………………………………………………………….………16, 23

Securities & Exchange Comm’n v. United States Reality & Improvement Co.,

310 U.S. 434 (1940)……………………………………………………………………...………12

Small v. United States,

544 U.S. 385 (2005)……………………………………………………………………...………15

Steele v. Bulova,

344 U.S. 280 (1952)……………………………………………………………………...………19

United Savings Ass’n v. Timbers of Inwood Forest Associates,

484 U.S. 365 (1988)……………………………………………………………………...………16

United States v. Wells,

519 US. 482 (1997)………………………………………………………………………………..8

United States Courts of Appeals Cases

In re Exide Techs.,

607 F.3d 957 (3rd Cir. 2009)……………………………………………………….………6, 8, 12

In re French,

440 F.3d 145 (4th Cir. 2006)…………………………………………………….…………..22, 24

In re Lakewood Eng’g & Mfg. Co., v Chi. Am. Mfg., LLC,

686 F.3d 372 (7th Cir. 2012)………………………………………………..…………..………11

In re Maxwell,

93 F.3d 1036 (2d Cir. 1996)………………………………………………….………21, 22, 23, 26

In re Simon,

153 F.3d 991 (9th Cir. 1998)…………………………………………………………….………26

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Lubrizol Enters. v. Richmond Metal Finishers,

756 F.2d 1043 (4th Cir. 1985)…………………………………………………..………...9, 13, 14

Subafilms, Ltd. v. MGM-Pathe Commc'ns Co.,

24 F.3d 1088 (9th Cir. 1994)………………………………………………………..……….23, 25

Sunbeam Prods. v. Chi. Am. Mfg.,

686 F.3d 372 (7th Cir. 2012)………………………………………………………………..6, 9, 10

Thompkins v. Lil’ Joe Records, Inc.,

476 F.3d 1294 (11th Cir. 2007)…………………………………………………………..……….6

United States v. Belfast,

611 F.3d 783 (11th Cir. 2010)…………………………………………………………...…..21, 22

United States v. Weingarten,

632 F.3d 60 (2d Cir. 2011)……………………………………………………………….………16

United States District Court Cases

Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC,

474 B.R. 76 (S.D.N.Y. 2012)…………………………………………………………….………26

United States Bankruptcy Court Cases

In re Bankr. Estate of Midland Euro Exch. Inc.,

347 B.R. 708 (Bankr. C.D. Cal. 2006)…………………………………………………..………16

In re Maxwell,

170 B.R. 800 (Bankr. S.D.N.Y. 1996)……………………………………….………21, 22, 23, 26

In re Matusalem,

158 B.R. 514 (Bankr. S.D. Fla. 1993)…………………………………………..………6, 7, 13, 14

In re McLean Industries, Inc.,

74 B.R. 589 (Bankr. S.D.N.Y.1987)……………………………………………………..………26

In re Petur U.S.A. Instrument Co., Inc.,

35 B.R. 561 (Bankr. W.D. Wash. 1983)……………………………………………..…………..12

In re Rajapakse,

346 B.R. 233 (Bankr. N.D. Ga. 2005)…………………………………………………..……….17

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In re Walnut Assoc.,

145 B.R. 489 (E.D. Pa. 1992)……………………………………………………………..………7

Tenucp Property, LLC v. Riley (In re GCP CT Sch. Acquisition, LLC),

429 B.R. 817 (B.A.P. 1st Cir. 2010)………………………………………………………………5

Statutes

11 U.S.C. § 70a (repealed 1978)…………………………………………………………………20

11 U.S.C. § 101 (2006)………………………………………………………………..………7, 10

11 U.S.C. § 362 (2006)………………………………………………………………………26, 27

11 U.S.C. § 365 (2006)…….……………………………………………………..………in passim

11 U.S.C. § 502 (2006)…………………………………………………………………..……9, 10

11 U.S.C. § 541 (2006)…………………………………………………………...………in passim

11 U.S.C. § 1501 (2005)…………………………………………………………………………23

11 U.S.C. § 1525 (2005)…………………………………………………………………………23

28 U.S.C. § 1334 (2005)……………………………………………………………………..16, 17

Other Authorities

H.R. REP. NO. 2320 (1952), reprinted in 1952 U.S.C.C.A.N.1960, 1976……………..………20

Laura Jelinek, Equity for Brand Equity: The Case for Protecting Trademark

Licensees in Licensor Bankruptcies, 40 AIPLA Q.J. 365 (2012)………………………7, 8, 11, 13

Michael T. Andrew, Executory Contracts Revisted, 62 U. Colo. L. Rev. 1 (1991)……..………10

Peter S. Menell, Bankruptcy Treatment of Intellectual Property Assets:

An Economic Analysis, 22 Berkeley Tech. L.J. 733 (2007) …………………………………….10

Restatement (Second) of Conflict of Laws (1971)…………………………………..………23, 28

Restatement (Second) of Contracts § 236 (1981)………………………………………..………26

S. Rep. No. 95–989, at 82 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5868………..………20

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S. Rep. No. 100-505, at 5, reprinted in 1988 U.S.C.C.A.N. at 3204………………….………8, 12

Suzanne Harrison, The Extraterritoriality of the Bankruptcy Code:

Will the Borders Contain the Code, 12 Bankr. Dev. J. 809 (1996)…………………………….. 21

T. Brandon Welch, The Territorial Avoidance Power of the

Bankruptcy Code, 24 Bankr. Dev. J. 553 (2008)……………………………………………….. 29

William L. Norton, Jr., Bankruptcy court in rem jurisdiction

in cross-border insolvencies, 8 Norton Bankr. L. & Prac. 3d § 154:6…………………………..27

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OPINIONS BELOW

The orders of the United States Bankruptcy Court for the District of Moot and the United

States District Court for the District of Moot are unreported and therefore are unavailable. The

decision of the United States Court of Appeals for the Thirteenth Circuit is also unreported.

However, the Thirteenth Circuit’s decision dated October 14, 2013, in Case No. 13-4080 is

incorporated in the record on appeal.

STATEMENT OF JURISDICTION

The formal statement of jurisdiction is waived pursuant to Competition Rule VIII.

STATUTORY PROVISIONS

The following statutory provisions are relevant to the facts of this case and are set forth in

Appendices A through H:

11 U.S.C. § 101

11 U.S.C. § 362

11 U.S.C. § 365

11 U.S.C. § 502

11 U.S.C. § 541

11 U.S.C. § 1501

11 U.S.C. § 1525

28 U.S.C. § 1334

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STATEMENT OF FACTS

The facts of this case are simple. A debtor with no respect for its obligations is

attempting to ruin the livelihood of a foreign businessman. This Court must now decide two

issues: (1) whether the debtor will be allowed to unilaterally strip an innocent businessman of his

trademark rights under the guise of bankruptcy; and (2) whether manipulations of the

Bankruptcy Code’s text will serve as the vehicle through which the debtor is able to do so.

The Parties.

Ravi Vohra is a hardworking, Eastlandian man dedicated to his career in the restaurant

industry. (R. 4). Vohra’s success in the industry began when he entered into a twenty-year

licensing agreement with Viraj Deshmukh, another Eastlandian citizen, which granted Vohra the

exclusive right to use the Burger Bites trademark in Eastlandia. (R. 4). This executory contract,

which is governed by Eastlandian law, gave Vohra the opportunity to expand the miniature

hamburger chain to thirty-two Burger Bites restaurants in Eastlandia, all under franchise

agreements with Vohra. (R. 4). Shortly after Vohra entered into the license agreement, Foodstar,

Inc., an American corporation, acquired worldwide rights to the trademark from the original

Eastlandian licensor (R. 5). This acquisition included all of the original licensor’s rights under

Vohra’s licensing agreement. (R. 5). Foodstar then expanded the Burger Bites trademark into

twenty-six other nations. (R. 3-4).

The Dispute.

After establishing itself in the miniature food industry, Foodstar attempted to expand its

reach by adding miniature cupcakes to its repertoire. (R. 3). Foodstar’s efforts proved futile, and

the poor business decision left the company saddled with significant debt. (R. 3). Without

sufficient capital to run its Burger Bites franchise, Foodstar determined that its best option was to

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reorganize the business through Chapter 11 bankruptcy. (R. 3). After the company failed to

obtain financing for the reorganization, Foodstar decided that liquidation would be in its best

interest. (R. 3). Foodstar’s most valuable asset is its Burger Bites trademark, which it intends to

sell, along with an assignment to the buyer of all of its franchise agreements for the stores

franchised by Foodstar. (R. 4). The only thing that stands in Foodstar’s way is its licensing

agreement with Vohra. (R. 5). Vohra’s continued use of the trademark in Eastlandia would

cause the sale of the trademark to sell for ten to fifteen percent less than if Vohra’s rights were

terminated. (R. 5).

The Rejection.

In a blatant attempt to rid itself of its obligations to Vohra, Foodstar filed a motion to

reject Vohra’s licensing agreement in preparation for the planned sale of the Burger Bites

trademark. (R. 5). Vohra objected to Foodstar’s motion to reject, raising two arguments. (R. 5).

First, Vohra argued that rejection of the agreement was not in the best interest of the estate, as it

would only deprive the estate of the benefits of the agreement without terminating his exclusive

right to use the trademark. (R. 5). Second, Vohra asserted § 365 of the Bankruptcy Code could

not be applied extraterritorially to a licensing agreement that has no connection to the United

States other than Foodstar’s pending bankruptcy. (R. 5). Without hearing evidence, the

bankruptcy court entered an order authorizing the rejection of Vohra’s licensing agreement. (R.

5).

The Subsequent Appeals.

Vohra timely appealed the order to the district court. (R. 5). Notwithstanding the

bankruptcy court’s decision, Vohra continued his use of the trademark in Eastlandia. (R. 5).

Vohra asserted that his use was permissible under both § 365 of the Code and Eastlandian

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bankruptcy law, which permits rejection of trademark licenses, but does not allow such a

rejection to terminate the licensee’s rights to use the trademark pursuant to the license. (R. 5-6).

Foodstar responded by filing an adversary proceeding in the bankruptcy court seeking an

injunction against Vohra’s continued use of the Burger Bites trademark. (R. 6). The bankruptcy

court entered an order declaring that Foodstar’s rejection of the licensing agreement terminated

Vohra’s rights and enjoined Vohra from using the Burger Bites trademark. (R. 6). Vohra

promptly appealed, and the bankruptcy court stayed its injunction pending the outcome of the

appeal. (R. 6). The district court affirmed both appeals without opinion. (R. 6). The Thirteenth

Circuit reversed the district court and adopted Vohra’s arguments. (R. 6). Foodstar timely

petitioned this Court for a writ of certiorari to review the judgment of the Thirteenth Circuit,

which this Court granted.

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SUMMARY OF THE ARGUMENT

Bankruptcy cannot serve as an unbridled shield behind which Foodstar may violate

Vohra’s rights. Foodstar is attempting to do in bankruptcy what it could not do before filing—

strip Vohra of his livelihood and seek a minimal payout for doing so. As the Thirteenth Circuit

appropriately recognized, a bankruptcy petition does not give Foodstar free rein to circumvent its

obligations.

Foodstar’s rejection of the trademark licensing agreement under § 365 of the Code does

not unilaterally strip Vohra of his right to continue using the Burger Bites trademark. Congress’s

decision to provide distinct treatment for some intellectual property under § 365(n) is not

indicative of the proper protection that trademarks should be afforded. It is inequitable to reward

Foodstar for using bankruptcy to skirt its obligations and punish Vohra by forcing him to start

anew.

Additionally, the presumption against extraterritoriality prevents the bankruptcy court

from enjoining Vohra’s use of the trademark in Eastlandia. Foodstar has failed to produce clear

evidence of congressional intent to extend § 365 beyond the territorial limits of the United States

because the language, legislative history, and statutory scheme of the Code are ambiguous.

Comity considerations also weigh heavily against extending § 365 outside the United States.

Finally, regardless of Congress’s extraterritorial intent, § 365 may not be applied to the licensing

agreement because the U.S. lacks personal jurisdiction over Vohra.

For these reasons, this Court should affirm the decision of the Thirteenth Circuit and hold

that rejection of a trademark licensing agreement does not strip Vohra of his rights to the

trademark and that the presumption against extraterritoriality bars the application of § 365 to

Vohra’s foreign licensing agreement.

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ARGUMENT

As with civil appeals, this Court applies a de novo standard of review to a bankruptcy

court’s conclusions of law and a clear error standard of review to a bankruptcy court’s findings

of fact. Pierce v. Underwood, 487 U.S. 552, 558 (1988). Neither party challenges the lower

court’s findings of facts, so this Court should review the questions of law de novo. Id.

I. UNDER § 365 OF THE CODE, REJECTION OF A TRADEMARK LICENSING

AGREEMENT DOES NOT UNILATERALLY TERMINATE VOHRA’S FAIRLY

PROCURED TRADEMARK RIGHTS.

The plain language of § 365 and its unambiguous legislative history support the

protection of trademark licensing agreements. 11 U.S.C. § 365 (2006). Section 365 of the Code

allows a debtor to assume or reject any executory contract. Id. As such, a debtor can decide

which contracts are beneficial to the bankruptcy estate and should be assumed, and which are

detrimental to the estate and thus should be rejected. Tenucp Property, LLC v. Riley (In re GCP

CT Sch. Acquisition, LLC), 429 B.R. 817, 824 (B.A.P. 1st Cir. 2010).

Rejection of a trademark licensing agreement does not unilaterally terminate a non-

debtor’s rights in the continued use of a trademark for three reasons. First, the effect of a

rejection does not eliminate the non-breaching party’s rights. Second, under § 365(n),

Congress’s decision to provide special treatment for licensees of some intellectual property

agreements to retain their rights is not indicative of the proper treatment of trademark

agreements. Lastly, it is inequitable to unilaterally terminate Vohra’s fairly procured trademark

rights. Thus, any termination of Vohra’s trademark rights is a clear violation of § 365, and this

Court should affirm the Thirteenth Circuit’s decision and grant Vohra’s continued use of the

Burger Bites trademark.

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A. Under § 365, the effect of a rejection does not terminate Vohra’s exclusive rights to

use the trademark.

The Code provides that the effect of rejection under § 365(g) is a breach. 11 U.S.C. §

365(g). The Seventh Circuit has previously held that a breach by the debtor has several

consequences; however, termination of the non-breaching party’s rights is not among them.

Sunbeam Products, Inc. v. Chicago American Mfg., LLC, 686 F.3d 372, 378 (7th Cir. 2012), cert.

denied, 133 S. Ct. 790 (U.S. 2012).

Rejection of a licensing agreement has no effect upon the contract’s continued existence.

Id. at 376. In Sunbeam, the Seventh Circuit held that rejection of a licensing agreement is not the

functional equivalent of a rescission and does not render the contract void. Id. at 378. Rejection

merely frees the debtor from the obligation to perform and has no effect upon the contract’s

continued existence. Id. As a result, rejection has two effects: (1) it eliminates the debtor from

any future liability extending from the licensing agreement; and (2) it discharges the debtor from

any future performance resulting from the agreement. Thus, while rejection alters the debtor’s

obligations to the agreement, it does not terminate or alter the licensee’s exclusive rights. Id.

More importantly, a trademark licensee may continue to use a trademark after rejection.

In re Matusalem, 158 B.R. 514, 523 (S.D. Fla. 1993); In re Exide Techs., 607 F.3d at 966-67

(Ambro, J., concurring). In Matusalem, the Court held that while the Code provided a means for

eliminating rights under some contracts, no such exception applied to trademark licensing

agreements because the licensee may elect to continue using such rights. Id. Therefore, rejection

does not nullify, rescind, or terminate the contract or the non-breaching party’s rights. Thompkins

v. Lil’ Joe Records, Inc., 476 F.3d 1294, 1306 (11th Cir. 2007).

Here, Foodstar’s rejection of the licensing agreement has no effect upon Vohra’s

continued right to use the Burger Bites trademark. (R. 5) Like the licensee in Matusalem, Vohra

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may elect to continue using his rights despite Foodstar’s rejection of the licensing agreement.

Matusalem, 158 B.R. at 523; see also In re Walnut Assoc., 145 B.R. 489, 499 (E. D. Pa. 1992)

(holding that the only effect of rejection is that the non-debtor party cannot make an

administrative claim against the debtor’s estate if the debtor fails to fulfill the obligations of the

contract). Thus, the Thirteenth Circuit properly held that Foodstar’s rejection does not

unilaterally terminate Vohra’s rights under the licensing agreement.

B. Under § 365(n), Congress’s choice to provide distinct treatment for some intellectual

property is not indicative of the proper treatment for trademarks.

Trademark licensees should be granted comparable protection given to licensees of the

intellectual property protected under § 365(n). Section 365(n) provides special protection to

licensees of intellectual property in cases where the debtor rejects the license. 11 U.S.C. §

365(n). In the result of a rejection, a licensee may opt either to treat the contract as terminated or

to retain its rights under the contract. Id. Because Congress explicitly stated its intent for

excluding trademarks, and because allowing the unilateral termination of a trademark licensing

agreement would cause a chilling effect on all parties involved, this Court should permit Vohra’s

continued use of the trademark.

1. The omission of trademarks under § 365(n) should not preclude trademarks from

protection given Congress’s intent and the prior role of trademark licensing

agreements.

In its definition of intellectual property, Congress included patents, copyrights, and trade

secrets, but intentionally omitted trademarks. 11 U.S.C. § 101 (2006). This intentional omission

of trademarks is logical given the historical background of § 365(n). The enactment of § 365(n)

was a response to developers in technical industries involving patents, trade secrets, and

copyright licenses. Laura Jelinek, Equity for Brand Equity: The Case for Protecting Trademark

Licensees in Licensor Bankruptcies, 40 AIPLA Q.J. 365 (2012). The proponents of § 365(n),

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who sought to develop computer software and biotechnology, feared their businesses would be at

risk if they lost their licensed intellectual property. Id. Congress’s passing of § 365(n) was a

direct response to that fear. Id. Thus, it was not that Congress did not think that trademarks

needed protection, but rather the matter of trademarks was not at issue. Id.

Congressional omissions should not be treated as negative assertions. This Court has

warned that it is “treacherous to find in congressional silence alone the adoption of a controlling

rule of law.” United States v. Wells, 519 U.S. 482, 496 (1997). When Congress enacted § 365(n),

it explicitly explained in the legislative history accompanying the section why it excluded

trademarks from the definition of intellectual property. In re Exide Techs., 607 F.3d 957, 967

(2011). The congressional record states, “matters of trademark cannot be addressed without more

extensive study and should allow for the development of equitable treatment of these matters by

bankruptcy courts.” S. Rep. No. 100-505, at 5, reprinted in 1988 U.S.C.C.A.N. at 3204.

In light of these direct congressional statements, it would be “treacherous” to endorse the

exclusion of trademark protection merely based on the intentional decision to omit trademarks

from the intellectual property definition. Wells, 519 U.S. at 496. To treat § 365(n) as if Congress

overlooked the protection of trademarks would conflict with the explicit expression of

congressional intent, which merely sought to further develop an understanding of trademarks.

Jelinek, supra at 405. Therefore, because § 365(n) was simply a response to the existing dispute,

Congress’s omission of trademarks should not be construed to prohibit licensee’s protection

under trademark licensing agreements. Id.

Additionally, today’s growing reliance upon trademark licensing agreements requires the

comparable protection given to other intellectual property agreements under § 365(n). Id. The

use of trademarks has changed significantly in recent years. Id. Traditionally, trademark

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licensing agreements were used to outsource the production of goods. Id. Today, licensees have

increasingly used trademark licensing agreements to establish franchises the same way in which

other licensees utilize patents and trade secret agreements. Id. As a result, licensees increasingly

expect to rely on trademarks for the preservation of their businesses. Id. Thus, the stability of

trademark licensing agreements has become as essential to investments as the stability of the

types of intellectual property protected under § 365(n) and thus warrants protection under the

Code. Id.

Here, Vohra expected to rely on the continued use of the Burger Bites trademark for the

preservation of his business. (R. 4). Vohra’s ability to conduct business and remain profitable

depends on the viability of his trademark licensing agreement with Foodstar. (R. 4). In

expanding his franchise, Vohra made substantial investments, expecting to utilize the Burger

Bites trademark for the agreed upon time. (R. 4). Therefore, in light of the direct congressional

statements, and the similarities between trademarks and the intellectual property protected under

§ 365(n), trademarks should be afforded comparable protection.

2. Even if trademarks are construed as distinct from the intellectual property

protected under § 365, this Court should permit specific performance since the

Code does not provide otherwise.

Section 365 indicates that rejection of an intellectual property agreement constitutes a

breach; however, it does not specify the remedies the non-breaching party may demand. 11

U.S.C. 365(n); Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043,

1048 (4th Cir. 1985). Under 502(g), a breach from a licensor’s nonperformance is turned into a

claim in damages in the form of a prepetition claim against the debtor. 11 U.S.C. 502 (2006);

Sunbeam 686 F.3d at 372. Section 502(g) limits the relief available to the non-breaching licensee

party—that is, it restricts available remedies for licensees of the intellectual property defined in §

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365(n). 11 U.S.C. 502(g). Section 365 of the Code includes patents, copyrights, and trade secrets

in its definition of intellectual property and intentionally excluded trademarks. 11 U.S.C. §

101(35A).

Unless the Code provides otherwise, a court should respect non-bankruptcy entitlements

by giving deference to other parties that have an interest in an action’s resolution. Butner v.

United States, 440 U.S. 48, 56 (1979). This is consistent with how the Code deals with non-

bankruptcy entitlements elsewhere. Id. Outside of bankruptcy, the non-breaching party could

seek monetary damages or specific performance. Michael T. Andrew, Executory Contracts

Revisted, 62 U. Colo. L. Rev. 1, 5 (1991). Because Congress chose to restrict the available

remedies for those special claimants under § 365(n), but not trademark licensees, the appropriate

inference is that Congress chose not to disturb the non-bankruptcy entitlements of non-breaching

trademark licensees. As further indicated in Sunbeam, since trademark licensees are not

protected under § 365(n), the Code is silent as to the remedy allowed. The Sunbeam court

granted the licensee specific performance because that remedy would be available outside of

bankruptcy. Therefore, even if this Court construes trademarks to be distinct from the intellectual

property protected under §365(n), this Court should allow for non-bankruptcy entitlements and

permit Vohra’s continued use of the Burger Bites trademark because the Code is silent to its

proper treatment.

3. Allowing the unilateral termination of a trademark licensee’s legitimate rights

will cause a chilling effect on future trademark licensing agreements.

Terminating Vohra’s rights may cause a chilling effect on future trademark licensing

negotiations. Peter S. Menell, Bankruptcy Treatment of Intellectual Property Assets: An

Economic Analysis, 22 Berkeley Tech. L.J. 733, 752 (2007). This may occur in three ways: (1)

licensees seeking to market a licensor’s trademark will fear entering into licensing agreements;

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(2) licensors, unable to sell or lease their trademarks to cautious licensees, will suffer a financial

loss; and (3) the emerging practice of “bundled” rights will result in inadequate protection. Id.

The risk of a licensor’s bankruptcy and subsequent termination of the licensing agreement

creates uncertainty in trademark licensing arrangements and can lessen the incentives for all

parties involved. Id.

First, if licensees are denied adequate protection over their licensed trademarks, they may

refrain from entering into future trademark agreements. In re Lakewood Eng’g & Mfg. Co., v

Chi. Am. Mfg., LLC, 686 F.3d 343, 372 (7th Cir. 2012). By investing in the expansion of the

trademark name, licensees expect to profit from their licensing agreements. Jelinek, supra at 743.

Thus, trademark protections are necessary to facilitate successful agreements. Id. at 743.

Moreover, provisions contracting around the right of the licensor to reject the agreement in

bankruptcy are generally unenforceable, essentially leaving the licensee without any avenue for

redress. Id. Denying trademark licensee’s protection will also have an effect on emerging

companies who seek to license their product as a way to obtain revenue. Id.

Lastly, allowing the unilateral termination of a trademark licensee’s rights could have a

negative effect on the emerging practice of bundling. Id. Generally, licensing agreements involve

more than just trademarks. Id. at 767. Bundled intellectual property rights are those licensing

agreements that include a mixture of copyrights, patents and trademarks. Id. Failing to proscribe

protection toward one part of the agreement can erode the rest of the contract. Id. Thus, the effect

of allowing the unilateral termination of Vohra’s rights could cause a chilling effect on future

trademark licensing agreements for all parties involved.

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C. Unilaterally terminating Vohra’s legitimate trademark rights is inequitable.

Equitable treatment is essential to bankruptcy disputes. Securities & Exchange Comm’n

v. United States Reality & Improvement Co., 310 U.S. 434, 469 (1940). When the termination of

a trademark licensing agreement results in the actual destruction of an otherwise profitable,

successful, and ongoing business, “equity will not permit such a result.” In re Petur U.S.A.

Instrument Co. 35 B.R. 561, 564 (Bankr. W.D. Wash. 1983). Because bankruptcy disputes

require equitable treatment and because the licensing agreement does not completely hinder the

debtor’s ability to sell or lease the trademark, this Court should permit Vohra’s continued use of

the trademark.

1. This Court should exercise equitable treatment in considering issues rooted in

bankruptcy.

A bankruptcy court is a court of equity. In re Petur, 35 B.R. at 561. In Petur, the parties

entered into a twenty-year licensing agreement where the licensee was granted the exclusive

right to use the debtor’s trademark. Id. at 561. The court found that the licensee’s livelihood and

entire business was based upon the agreement, and that termination would effectively force the

licensee out of business, which would be an inequitable result. Id. at 563. In the exercise of its

equitable jurisdiction, the bankruptcy court has both the power and the duty to ensure justice. Id.

Congress explicitly intended for courts to exercise equitable treatment in trademark

matters. S. Rep. No. 100-505, at 5, reprinted in 1988 U.S.C.C.A.N. at 3204. In the Senate

Committee Reports accompanying § 365(n), Congress stated that courts “must allow equitable

treatment of trademarks in bankruptcy.” Id; In re Exide Techs., 607 F.3d at 966-67 (Ambro, J.,

concurring). Given Congress’s express statement, a failure to apply principles of equity would be

in direct conflict with clear congressional intent. Id.

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This Court should apply principles of equity in determining Vohra’s continued right to

use the Burger Bites trademark because Vohra has invested in making the Burger Bites license

profitable. Trademark licensees typically invest in advertising and marketing promotions, obtain

governmental approvals, purchase expensive equipment, and perform other essential

undertakings in building a market for the licensed trademark. Jelinek, supra at 405. Here, Vohra

has made substantial investments in his business with the expectation that he would be able to

use the trademark for the duration of the agreement at minimum. (R. 4). Given such substantial

investments, termination of Vohra’s rights will significantly affect his livelihood, as his entire

business relies upon his continued ability to use the trademark. (R. 4).

2. When the licensee’s continued rights under the licensing agreement do not

completely hinder the debtor’s ability to sell or license its trademark,

termination is inappropriate.

Termination of a licensee’s rights is only permissible when the debtor’s use of its estate

depends on completely eliminating the licensee’s rights under the licensing agreement. Lubrizol

756 F.2d at 1043. In Lubrizol, the licensing agreement imposed such tight restrictions that

without termination of the agreement, the debtor would have been entirely prevented from the

sale of its technology. Id. The Court held that because the agreement prohibited the debtor from

selling or licensing its technology, termination of the contract was permissible. Id. In Matusalem,

the court also weighed the relative losses of the parties in making its determination. Matusalem,

158 B.R. at 522. There, the Court concluded that termination of the licensee’s rights under the

trademark licensing agreement would “utterly destroy the [licensee’s] business… and with it the

livelihood of its principals and employees… and without any realistic expectation of success by

the debtor.” Id. As a result, the Court held that terminating the licensee’s rights was

impermissible. Id.

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Since Foodstar’s ability to sell or lease the Burger Bites trademark does not depend on

eliminating Vohra’s rights, terminating the agreement would be inappropriate. Lubrizol, 756

F.3d at 1047; (R. 5). With Vohra’s continued use of the trademark, Foodstar will only sustain a

loss of ten to fifteen percent of the trademark’s sale price. (R. 5). Unlike the tremendous blow to

the debtor in Lubrizol who would have been entirely unable to sell or license its trademark,

Foodstar can still sell its Burger Bites trademark regardless of Vohra’s continued use. (R. 5);

Lubrizol, 756 F.3d at 1048. While Vohra’s continued use will result in a slightly lower sale price

of the trademark, this “modest financial impact” is not a significant impairment to its value. (R.

13). However, with Foodstar’s unilateral termination of Vohra’s rights, Vohra’s entire business,

like the licensee’s business in Matusalem, will be significantly impaired. (R. 5); Matusalem, 158

B.R. at 522. Therefore, in balancing the interests of both parties, the Court should weigh the

relative losses between Vohra and Foodstar to determine the most equitable result. It is clear that

the relative losses to Vohra would significantly outweigh the relative losses to Foodstar. (R. 5).

Therefore, because Vohra’s agreement with Foodstar does not completely hinder Foodstar’s

ability to sell or lease the Burger Bites trademark, this Court should affirm the decision of the

Thirteenth Circuit.

II. EVEN IF TRADEMARKS ARE NOT AFFORDED PROTECTION UNDER § 365,

THE PRESUMPTION AGAINST EXTRATERRITORIALITY BARS THE

EXTRATERRITORIAL APPLICATION OF § 365 TO A FOREIGN LICENSING

AGREEMENT.

“The legislation of Congress, unless a contrary intent appears, is meant to apply only

within the territorial jurisdiction of the United States.” E.E.O.C. v. American Arab Oil Co., 499

U.S. 244, 248 (1991) (“Aramco”) (citing Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285 (1949)).

Because Congress ordinarily intends for federal laws to have domestic application, if no

affirmative intention of Congress is clearly expressed to give a statute extraterritorial effect, it

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cannot be applied outside the United States. Id.; Small v. United States, 544 U.S. 385, 388-89

(2005).

This presumption against extraterritoriality reflects the principle that while U.S. law

governs domestically, it “does not rule the world.” Kiobel v. Royal Dutch Petroleum Co.,

___U.S.___, 133 S.Ct. 1659, 1664 (2013) (quoting Microsoft Corp. v. AT&T Corp., 550 U.S.

437, 454 (2007)). In Aramco, this Court reaffirmed its commitment to the presumption. Aramco,

499 U.S. at 258. In doing so, the Court recognized that only a “clear statement” of extraterritorial

intent could rebut the presumption. Id. Recently, this Court took the opportunity to clarify the

importance of the presumption. Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247, 130 S.Ct.

2869, 2877 (2010). The Morrison decision served to renew judicial devotion to a strict

application of the presumption against extraterritoriality. Id. By refusing to extend federal law

extraterritorially, the Morrison Court upheld strict adherence to the notion that “when a statute

gives no clear indication of an extraterritorial application, it has none.” Id. at 2878. In doing so,

the Court also noted that the proponent of extraterritoriality bears a heavy burden of producing

unmistakable evidence of such intent. Id.; Aramco, 499 U.S. at 250.

The Thirteenth Circuit correctly held that § 365 of the Code does not apply to Vohra’s

Eastlandian licensing agreement for three reasons. First, nothing in the language, legislative

history, or statutory scheme of the Code as a whole expresses a clear extraterritorial intent of §

365. Foodstar has failed to produce unambiguously clear evidence of congressional intent to

apply § 365 beyond the territorial limits of the United States. Foodstar’s attempts to manipulate

the tools of statutory construction are not enough to overcome the presumption against

extraterritoriality. Second, comity considerations also weigh heavily against the extension of §

365 to Vohra’s foreign licensing agreement. Finally, even if an extraterritorial intent of Congress

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is found in the ambiguous language of the Code, § 365 may not be applied to the Vohra foreign

licensing agreement because the U.S. lacks personal jurisdiction over Vohra. Therefore, this

Court should affirm the Thirteenth Circuit’s decision and hold that the presumption against

extraterritoriality prevents application of § 365 to the foreign licensing agreement in this case.

A. The language, legislative history, and statutory scheme of the Code do not express

an unambiguously clear statement of intent to apply § 365 extraterritorially.

Rules of statutory interpretation require a narrow application of § 365. While the starting

point in any inquiry of statutory construction is the plain language of the statute itself, nothing in

the plain language of § 365 clearly indicates congressional intent to apply it extraterritorially. 11

U.S.C. § 365; In re Bankr. Estate of Midland Euro Exch. Inc., 347 B.R. 708, 717 (Bankr. C.D.

Cal. 2006). Thus, our inquiry turns on the consideration of “all available evidence,” to determine

the most faithful reading of the text. United States v. Weingarten, 632 F.3d 60, 65 (2d Cir. 2011)

(quoting Sale v. Haitian Ctrs. Council, Inc., 509 U.S. 155, 177 (1993). As such, the Court may

consult additional indicia of congressional intent, including other statutory provisions, legislative

history, and statutory scheme, to determine if they shed light on the extraterritoriality of § 365.

United Savings Ass’n v. Timbers of Inwood Forest Associates, 484 U.S. 365, 371 (1988) (“a

provision that may seem ambiguous in isolation is often clarified by the remainder of the

statutory scheme”).

1. Section 1334(e)(1) does not squarely address extraterritorial intent.

Only two textual references in the entire Code indicate a possible extraterritorial intent of

Congress. The first of these references is found in § 1334(e)(1) of the Code. 28 U.S.C. § 1334

(2005). Section 1334(e)(1) is a jurisdictional provision that grants a court in rem jurisdiction over

property of the estate. Id. Essentially, this provision allows U.S. courts to hear disputes related to

a debtor’s property.

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However, even assuming that the provision extends a court’s jurisdiction to foreign

property, it does not automatically allow the court to apply U.S. law to any foreign dispute.

Kiobel, 133 S.Ct. at 1666. In Kiobel, this Court rejected finding extraterritorial intent in a similar

jurisdictional grant found in the Alien Tort Statute, differentiating between jurisdiction and

choice of law principles in applying a statute extraterritorially. Id. The Kiobel Court recognized

that “the question…is not whether a federal court has jurisdiction…[but] instead whether the

court has authority to recognize a cause of action under U.S. law.” Kiobel, 133 S.Ct. at 1666; (R.

12).

Here, too, the question of extraterritorial application is a “merits question,” not a question

of jurisdiction. Morrison, 130 S.Ct. at 2877. The Thirteenth Circuit properly disposed of the

unconvincing argument that § 1334(e)(1) suggests an extraterritorial intent. (R. 21). Like the

jurisdictional grant in the Alien Tort Statute, § 1334(e)(1) does not allow courts to automatically

apply U.S. law to any dispute in which foreign property is involved. Kiobel, 133 S.Ct. at 1666. In

this case, even if we assume that this Court has jurisdiction over the Eastlandian licensing

agreement under § 1334(e)(1), our inquiry rests upon which law may be applied to the dispute,

not which court has jurisdiction. Id. Thus, regardless of § 1334(e)(1), this Court must still

determine if U.S. substantive bankruptcy law is applicable to a foreign licensing agreement.

Therefore, the jurisdictional provision in § 1334(e)(1) fails to squarely address extraterritoriality,

and our inquiry must turn to the only other section of the Code that may indicate a possible

extraterritorial intent, § 541(a).

2. The language of § 541(a) is too ambiguous to rely upon for a clear expression of

extraterritorial intent.

Because § 1334(e)(1) fails to address extraterritoriality, some courts rely on § 541(a) to

extend the Code extraterritorially. In re Rajapakse, 346 B.R. 233, 236 (Bankr. N.D. Ga. 2005).

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Section 541(a) defines “property of the estate” in relevant part as “all of the following property,

wherever located and by whomever held.” 11 U.S.C. § 541 (2006). Nevertheless, without a

modifying phrase to either limit or broaden the territorial scope of “wherever located,” § 541(a)

is ambiguous. See Id. (“Section 541 is ambiguous regarding its possible extraterritorial effect”).

Because the language of § 541(a) is unclear, it plausibly lends itself to two conflicting

interpretations: (1) a narrow one, which only includes property within the United States; and (2)

a broad one, which extends to property both within and outside of the United States. Id.

This Court has repeatedly held that even statutes that expressly reference “foreign

commerce” do not apply abroad. New York Central R. Co. v. Chisholm, 268 U.S. 29, 45 (1925).

In Chisholm, the extraterritorial application of the Federal Employers’ Liability Act (FELA) was

at issue. Id. FELA provided that railroad carriers were liable to their employees for damages

occurring while the employees were engaging in “foreign commerce” or commerce between

“any of the States or territories and any foreign nation.” Id. at 30. Despite such broad language,

this Court refused to extend FELA to a damages action by a U.S. citizen who was employed on a

U.S. railroad and suffered fatal injuries only thirty miles north of the U.S. border into Canada. Id.

at 31. The Court explained that the statute contained “no words which definitely disclose an

intention to give it extraterritorial effect.” Id. Here, § 541(a) of the Code does not “definitely

disclose” an extraterritorial intention any more than FELA’s express reference to “foreign

commerce.” Id. Thus, to impute a clear statement of extraterritorial intent based on § 541(a)

would be erroneous.

Additionally, generic statutory language is not enough to rebut the presumption against

extraterritoriality. Aramco, 499 U.S. at 250-51; Kiobel, 133 S.Ct. at 1665 (finding that boilerplate

language such as “any” and “every” were not enough to overcome the presumption against

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extraterritoriality). Words with “universal scope” must be confined in “operation and effect to

the territorial limits over which the lawmaker has general and legitimate power.” Steele v. Bulova

344 U.S. 280, 290-91 (1952) (quoting Am. Banana Co. v. United Fruit Co., 213 U.S. 347, 357

(1909)). The “wherever located” language of § 541(a) reflects the precise type of statutory

boilerplate the presumption against extraterritoriality was conceived to defeat. T. Brandon

Welch, The Territorial Avoidance Power of the Bankruptcy Code, 24 Bankr. Dev. J. 553, 564

(2008). Employing such generic language to impute a clear extraterritorial intent of Congress

requires far too much inference.

Finally, plausible interpretations of a statute are not enough to overcome the presumption

against extraterritoriality. Morrison, 130 S.Ct. at 2883. To overcome the presumption, Foodstar

must make an affirmative showing of congressional intent to apply § 365 extraterritorially.

Aramco, 499 U.S. at 249. Here, plausibility fails to meet Foodstar’s heavy burden. If plausible

interpretations of statutory language were enough to override the presumption against

extraterritoriality, there would be little left of the presumption. Id. at 253. Therefore, the mere

existence of two plausible interpretations is evidence that extraterritorial application still requires

inference. Welch, supra at 564. Such inference precludes the clear expression of congressional

intent necessary to apply § 365 extraterritorially. Id. at 564-565. The only clear statement that

can be made is that the language of § 541 is undeniably ambiguous as it relates to the foreign

application of § 365, and this ambiguity necessitates the strict application of the presumption

against extraterritoriality. 11 U.S.C. § 541(a) (“all the following property, wherever located and

by whomever held”). Thus, the Thirteenth Circuit properly rejected the argument that the

language of § 541(a) clearly established extraterritorial intent.

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3. The Code’s legislative history does not overcome a strict application of the

presumption against extraterritoriality.

The dissent of the Thirteenth Circuit erroneously relies upon the legislative history of a

former version of the Code to argue that § 541(a) expresses a clear statement of intent to apply §

365 extraterritorially. (R. 22). The dissent begins its analysis by pointing to the legislative history

of the § 541(a) “wherever located” language. (R. 22). Senate reports from 1977 assert that §

541(a) applies to “all kinds of property, including tangible or intangible property, causes of

action, (See Bankruptcy Act § 70a (6)), and all other forms of property currently specified in §

70a of the Bankruptcy Act § 70a.” S. Rep. No. 95–989, at 82 (1978), reprinted in 1978

U.S.C.C.A.N. 5787, 5868. From there, the dissent directs our attention to the referenced portion,

§ 70a, which was repealed in 1978. (R. 22). Section 70a reads in relevant part “the trustee of the

estate of a bankrupt…shall…be vested by operation of law with the title of…all of the following

kinds of property wherever located.” 11 U.S.C. § 70a (repealed 1978). Like the ambiguous

language of § 541(a), § 70a provides no additional clarification in the quest for extraterritorial

intent. To complete its analysis, the dissent turns to the legislative history accompanying § 70a,

which was written in 1952 and provides that “a trustee in bankruptcy is vested with the title of

the bankrupt in property which is located without, as well as within, the United States.” H.R.

REP. NO. 2320 (1952), reprinted in 1952 U.S.C.C.A.N.1960, 1976; (R. 22). It is here, in a

congressional record written almost sixty years ago to accompany a section of the former

bankruptcy statute that was repealed over thirty-five years ago, where the dissent urges us to find

a purportedly “clear statement” of extraterritorial intent. (R. 22).

The dissent’s approach erroneously disregards customary tools of statutory construction.

The link between § 365 and a statement of Congress from almost sixty years ago is far too

tenuous to serve as a clear source of congressional intent. While this legislative history may have

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been helpful in determining the reach of § 541(a) before Aramco required a “clear statement” of

extraterritorial intent, it is insufficient to overcome today’s strict application of the presumption

against extraterritoriality. Aramco, 499 U.S. at 248; See also Suzanne Harrison, The

Extraterritoriality of the Bankruptcy Code: Will the Borders Contain the Code, 12 Bankr. Dev. J.

809, 836 (1996). To rely on this interpretation as a faithful reading of the text is an outright

misuse of legislative history.

4. The overall statutory scheme of the Code is not indicative of intent to apply §

365 extraterritorially.

In its extraterritoriality inquiry, this Court may also consider the “fabric of the Code as a

whole” to determine if there is congressional intent to apply a particular section extraterritorially.

In re Maxwell, 170 B.R. 800, 810 (Bankr. S.D.N.Y. 1996), aff’d, 93 F.3d 1036 (2d Cir. 1996)

(affirmed on comity grounds). Like the language of the Code, the overall statutory scheme does

not present a clear statement to apply § 365 extraterritorially.

While some courts have inferred a clear statement of extraterritorial intent from a

statute’s overall scheme, the bar for such an inference is quite high. United States v. Belfast, 611

F.3d 783, 811 (11th Cir. 2010). In Belfast, the Eleventh Circuit examined the extraterritorial

reach of the Torture Act. Id. The Court held that a clear statement of extraterritorial intent could

be inferred from the overall statutory scheme of the Torture Act because (1) the focus of the

statute was directed at preventing torture throughout the world; (2) the international scope of the

statute was self-evident given its focus on preventing torture in nations where rule of law was

broken; and (3) that limiting the statute’s prohibitions only to acts occurring within the U.S.

would undermine the statute's effectiveness. Id.

Here, no such clear statement of extraterritorial intent may be inferred from the overall

statutory scheme of the Code. In re Maxwell, 170 B.R. at 811. The focus of the Code is to give

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debtors a fresh start through business reorganization. In re French, 440 F.3d 145, 154 (4th Cir.

2006). Nothing about the Code evinces an international scope, and, if such international scope

was intended, it certainly is not self-evident given the ambiguous language of the statute. See In

re Maxwell, 170 B.R. at 811 (holding that “the fabric of the Code” did not demonstrate a clear

extraterritorial intent). Finally, unlike the Torture Act, which would have been “dramatically, if

not entirely” undermined if not applied extraterritorially, here, no such threat would be

implicated by a decision not to apply the Code extraterritorially. Belfast, 611 F.3d at 811.

Moreover, if a statute provides for some extraterritorial application, the presumption

against extraterritoriality serves to limit the provision to its precise terms. Morrison, 130 S. Ct.

at 2883; Microsoft, 550 U.S. at 455–456. The Thirteenth Circuit appropriately recognized that

the presumption against extraterritoriality “applies at every stage of the analysis to act as a check

against extraterritorial application of the law.” (R. 13). Today, the inquiry before this Court is not

an “all-or-nothing” proposition, as Foodstar would characterize it. (R. 13). Each section of the

Code must be independently analyzed against the backdrop of the presumption against

extraterritoriality. Aramco, 499 U.S. at 248. Thus, the overall statutory scheme of the Code fails

to provide any clear indication of extraterritorial intent.

B. Comity considerations weigh heavily against applying § 365 to a foreign licensing

agreement with no connection to the United States besides the licensor’s pending

bankruptcy case.

Comity considerations require strict enforcement of the presumption against

extraterritoriality because choice-of-law principles dictate the application of Eastlandian law to

the Vohra licensing agreement. McCulloch, 372 U.S. at 21. The presumption recognizes that the

application of U.S. law to conduct on foreign soil “creates a serious risk of interference with a

foreign nation's ability to independently regulate its own commercial affairs.” F. Hoffmann-La

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Roche Ltd. v. Empagran S.A., 542 U.S. 155, 165 (2004). The presumption serves to protect

against unintended clashes between our laws and those of other nations, which could result in

international discord. Aramco, 499 U.S. at 248; McCulloch, 372 U.S. at 20–22. Thus, Congress

alone has the ability to make important policy decisions, where the chance of international

discord is high. Benz v. Compania Naviera Hidalgo, S.A., 353 U.S. 138, 147 (1957). However,

even if the potential for international discord is weak or nonexistent, the presumption still

applies. Sale, 509 U.S. at 173; Maxwell, 170 B.R. at 833.

Congress’s desire to respect the sovereignty of other nations in bankruptcy law is clear

through its adoption of Chapter 15 of the Code. See 11 U.S.C. § 1501 (2005). Chapter 15 focuses

on dealing with cross-border bankruptcy disputes. Id. One of the most important goals of chapter

15 is to promote cooperation and communication between U.S. courts and parties of interest in

cross-border cases. 11 U.S.C. § 1525 (2005). This goal is accomplished by, among other things,

explicitly charging the court to "cooperate to the maximum extent possible" with foreign courts

and foreign representatives. Id.

The best way to respect the sovereignty of other nations is by respecting when their laws

should be applied. Subafilms, Ltd. v. MGM-Pathe Commc'ns Co., 24 F.3d 1088, 1098 (9th Cir.

1994). The practice of “using international law to limit the extraterritorial reach of statutes” is

firmly established in our jurisprudence. Hartford Fire Ins. Co. v. California, 509 U.S. 764, 818

(1993). A court may consider a number of relevant factors in determining the appropriate law

applicable to a dispute including: (1) the relative interests of the countries involved in the

dispute; (2) the protection of justified expectations; and (3) the relevant policies of the forum.

Id.; Restatement (Second) of Conflict of Laws § 6 (1971).

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Recently, the Fourth Circuit considered choice-of-law principles in extending a section of

the Code extraterritorially. In re French, 440 F.3d at 154. The Court principally based its

extraterritorial application of the Code on its determination that it was more appropriate to apply

U.S. law, as opposed to Bahamian law, to the dispute. Id. Because almost all of the parties

involved in the dispute were based in the U.S. and most of the activity surrounding the dispute

took place in the U.S., the Court found that an extraterritorial application of the Code followed

choice-of-law principles closely. Id. Moreover, the person principally affected by the

extraterritorial extension of the Code had a strong connection to the U.S., and there was no

danger that the U.S. bankruptcy law at issue would conflict with Bahamian bankruptcy law. Id.

Accordingly, the Court found these comity considerations justified the extraterritorial application

of U.S. law. Id.

Unlike the dispute in In re French, standard choice-of-law principles point to the

application of Eastlandian law. Id. Here, the interests of Eastlandia far outweigh the interests of

the U.S. in this dispute. Not only was the licensing agreement executed in Eastlandia between

two Eastlandian citizens, but Eastlandian law also governs the agreement. (R. 4). Additionally,

the licensing agreement does not sufficiently touch and concern the U.S. to displace the

presumption against extraterritoriality. (R. 13); See Kiobel, 133 S.Ct. at 1669. The only

connection that the licensing agreement has to the U.S. is the fact that Foodstar, an American

corporation, is a party to it. (R. 5). Thus, the interests of the U.S. are nowhere near as significant

as those of Eastlandia in governing the dispute. Furthermore, Vohra likely never expected that

U.S. law would apply to the licensing agreement since he initially entered into the agreement

with another Eastlandian citizen. (R. 4). Even after Foodstar acquired the rights to the agreement,

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it is unlikely that Vohra would have expected U.S. law to apply to it since Eastlandian law

governs the agreement. (R. 4).

Finally, in addition to strong sovereignty policies underlying U.S. law, this Court has

held that a statute should never be construed to violate the laws of other nations if any other

possible construction exists. McCulloch, 372 U.S. at 21 (quoting Murray v. Schooner Charming

Betsy, The, 6 U.S. 64, 118 (1804)). Here, Eastlandian bankruptcy law permits rejection of

trademark licenses, but that rejection does not terminate the licensee’s rights to use the trademark

pursuant to the license. (R. 5). Because Eastlandian law is in direct conflict with U.S. law,

allowing § 365 to terminate Vohra’s rights to use the trademark would violate Eastlandian law.

Under McCulloch, such a construction is not permissible. McCulloch, 372 U.S. at 21. Applying

these choice-of-law principles clearly necessitates the application of Eastlandian law to the

dispute.

Thus, comity considerations weigh strongly in favor of a strict application of the

presumption against extraterritoriality. Section 365 should not be applied to the Eastlandian

licensing agreement because choice-of-law principles clearly point to the application of

Eastlandian law. See Subafilms, 24 F.3d at 1098 (“choice-of-law questions provide a compelling

reason for applying the Aramco presumption”). The decision of the Thirteenth Circuit represents

a respectful understanding of the sovereignty of Eastlandia.

C. Even if this Court adopts a broad interpretation of § 541(a), the extraterritorial

application of § 365 would be improper because the U.S. lacks personal jurisdiction

over Vohra.

The Thirteenth Circuit appropriately recognized that § 541(a) does not express a clear

indication that Congress intended each and every provision of the Code be applied to

transactions having no bearing on the U.S. other than the pendency of a bankruptcy case. (R. 12);

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See In re Maxwell, 170 B.R. at 811 (refusing to extend a section of the Code extraterritorially

solely on the basis that § 541(a) has been used to extend other sections of the Code

extraterritorially). The use of § 541(a) to extend other sections of the Code extraterritorially does

not warrant the extraterritorial extension of all sections of the Code. See Id. Even if this Court

accepts the broad application of the “wherever located” language of § 541(a), the extraterritorial

application of § 365 to the foreign licensing agreement would be improper without an inquiry

focused specifically on § 365.

The limited extraterritorial reach of § 541(a) is best understood with an example of its

past application. Some courts have found an extraterritorial application of § 541(a) appropriate

where foreign property under the § 362 automatic stay provision was at issue. Sec. Investor Prot.

Corp. v. Bernard L. Madoff Inv. Sec. LLC, 474 B.R. 76, 81 (S.D.N.Y. 2012); In re McLean

Industries, Inc., 74 B.R. 589, 601 (Bankr. S.D.N.Y.1987). Section 362 provides that “a trustee,

after notice and a hearing, may use, sell, or lease…property of the estate.” 11 U.S.C. § 362

(2006). In extending the reach of § 362 automatic stays extraterritorially, courts recognize a

debtor’s property interest in protecting its title to foreign property.

For jurisdictional purposes of extending § 362 automatic stays extraterritorially, a court

only needs to have in rem jurisdiction over the foreign property. In re Simon, 153 F.3d 991, 996

(9th Cir. 1998) (“a bankruptcy court may validly exercise its in rem jurisdiction to protect estate

property”). However, for extraterritorial application of § 365, foreign executory contracts

warrant special consideration because they implicate a different set of concerns than foreign

property of an automatic stay under § 362. In the case of § 365, any breach of the contract by

either party gives rise to personal liability. Great-W. Life & Annuity Ins. Co. v. Knudson, 534

U.S. 204, 210 (2002); Restatement (Second) of Contracts § 236 (1981) (“Every breach gives rise

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to a claim for damages.”). Therefore, foreign executory contracts under § 365, unlike other

foreign property under § 362, also involve a foreign party. The involvement of a foreign party

implicates the need for in personam jurisdiction. International Shoe Co. v. Washington, 326 U.S.

310, 316 (1945). As such, in rem jurisdiction over the foreign executory contract alone is

insufficient for extraterritorial application of § 365; a court must also exercise in personam

jurisdiction over the foreign party to apply § 365 extraterritorially. Id. Here, this Court must

determine if the reach of the Code may be extended to Vohra. This additional requirement of

personal jurisdiction over Vohra in applying § 365 extraterritorially precludes its application to

the Vohra foreign licensing agreement.

Furthermore, the extraterritoriality of the § 362 automatic stay provision has its own set

of limitations. Although courts only need in rem jurisdiction to exercise its control over foreign

property, in every case where § 541(a) and the § 362 automatic stay have been applied

extraterritorially, the court also had in personam jurisdiction over the non-debtor party. William

L. Norton, Jr., Bankruptcy court in rem jurisdiction in cross-border insolvencies, 8 Norton

Bankr. L. & Prac. 3d § 154:6. Thus, even where courts have extended § 362 extraterritorially,

they had in personam jurisdiction. Id. Therefore, if a court is seeking to enforce the automatic

stay provision against a foreign non-debtor with no presence in the U.S., the extraterritorial reach

of § 541(a) is not enforceable because no personal jurisdiction exists.

It follows that to apply § 365 extraterritorially under § 541(a), this Court would also have

to have personal jurisdiction over the non-debtor. However, this Court lacks in personam

jurisdiction over Vohra because Vohra lacks minimum contacts with the U.S. International

Shoe, 326 U.S. at 316 (1945). To show sufficient minimum contacts, there must be evidence (1)

that Vohra has purposefully availed himself of the forum; and (2) that extending personal

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jurisdiction over Vohra does not offend “traditional notions of fair play and substantial justice.”

Id.; See also Restatement (Second) of Conflict of Laws § 28 (1971) (“a state has power to

exercise judicial jurisdiction over an individual who is present within its territory unless the

individual's relationship to the state is so attenuated as to make the exercise of such jurisdiction

unreasonable”). In Burger King, this Court held that a non-resident defendant purposefully

availed himself of the U.S. where he agreed to a choice of law clause within a contract and also

had other contacts with the U.S. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985).

Here, Vohra lacks sufficient minimum contacts because he never purposefully availed

himself of the U.S. Unlike the contract in Burger King, the licensing agreement is governed by

Eastlandian law, not U.S. law. Id. at 474; (R. 5). Further, Vohra has no other contacts with the

U.S. (R. 5). Thus, Vohra could not have foreseen settling any disputes outside of Eastlandia.

Burger King, 471 U.S. at 474; (R. 5). Additionally, Vohra initially entered into the licensing

agreement with another Eastlandian citizen, from whom Foodstar acquired the rights to the

agreement. (R. 4-5). In entering into the licensing agreement with an Eastlandian citizen, Vohra

had no reason to anticipate being haled into court in the U.S. The unilateral activity of Foodstar

is insufficient to confer in personam jurisdiction over Vohra. Hanson v. Denckla, 357 U.S. 235,

253 (1958). Thus, since Vohra’s only connection to the U.S. is the licensing agreement with

Foodstar, Vohra lacks sufficient minimum contacts to establish in personam jurisdiction.

Notwithstanding the establishment of minimum contacts, extending U.S. law to Vohra

violates traditional notions of fair play and substantial justice because Eastlandian law should be

applied to the dispute. International Shoe, 326 U.S. at 316. To force Vohra to be subjected to

U.S. law would be unjust since Eastlandian law governs the agreement, and Vohra has no other

connection to the U.S. (R. 5). While Vohra does not question the Bankruptcy Court’s in rem

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jurisdiction over the Eastlandian licensing agreement, he does contest its in personam

jurisdiction over him. As such, this Court should affirm the decision of the Thirteenth Circuit and

hold that § 365 cannot be applied extraterritorially to the Vohra foreign licensing agreement.

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CONCLUSION

For the foregoing reasons, Respondent Ravi Vohra respectfully requests that this Court

affirm the judgment of the United States Court of Appeals for the Thirteenth Circuit and hold

that (1) the unilateral rejection of a trademark licensing agreement under § 365 of the

Bankruptcy Code does not strip a licensee of its fairly procured trademark rights; and that (2) the

presumption against extraterritoriality bars the application of § 365 of the Bankruptcy Code to a

foreign licensing agreement.

Respectfully Submitted,

_______________________________

TEAM R46

COUNSEL FOR RESPONDENT

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A

Appendix A: 11 U.S.C. § 101. Definitions

…

(35A) The term "intellectual property" means—

(A) trade secret;

(B) invention, process, design, or plant protected under title 35;

(C) patent application;

(D) plant variety;

(E) work of authorship protected under title 17; or

(F) mask work protected under chapter 9 of title 17;

to the extent protected by applicable nonbankruptcy law.

…

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B

Appendix B: 11 U.S.C. § 362. Automatic Stay

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or

303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection

Act of 1970, operates as a stay, applicable to all entities, of—

(1) the commencement or continuation, including the issuance or employment of process,

of a judicial, administrative, or other action or proceeding against the debtor that was

or could have been commenced before the commencement of the case under this title,

or to recover a claim against the debtor that arose before the commencement of the

case under this title;

(2) the enforcement, against the debtor or against property of the estate, of a judgment

obtained before the commencement of the case under this title;

(3) any act to obtain possession of property of the estate or of property from the estate or

to exercise control over property of the estate;

(4) any act to create, perfect, or enforce any lien against property of the estate;

(5) any act to create, perfect, or enforce against property of the debtor any lien to the

extent that such lien secures a claim that arose before the commencement of the case

under this title;

(6) any act to collect, assess, or recover a claim against the debtor that arose before the

commencement of the case under this title;

(7) the setoff of any debt owing to the debtor that arose before the commencement of the

case under this title against any claim against the debtor; and

(8) the commencement or continuation of a proceeding before the United States Tax

Court concerning a tax liability of a debtor that is a corporation for a taxable period

the bankruptcy court may determine or concerning the tax liability of a debtor who is

an individual for a taxable period ending before the date of the order for relief under

this title.

…

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C

Appendix C: 11 U.S.C. § 365. Executory Contracts and Unexpired Leases

(a) Except as provided in sections 765 and 766 of this title [11 USCS §§ 765 and 766] and in

subsections (b), (c), and (d) of this section, the trustee, subject to the court's approval, may

assume or reject any executory contract or unexpired lease of the debtor.

…

(g) Except as provided in subsections (h)(2) and (i)(2) of this section, the rejection of an

executory contract or unexpired lease of the debtor constitutes a breach of such contract or

lease—

(1) if such contract or lease has not been assumed under this section or under a plan

confirmed under chapter 9, 11, 12, or 13 of this title [11 USCS §§ 901 et seq., 1101 et

seq., 1201 et seq., or 1301 et seq.], immediately before the date of the filing of the

petition; or

(2) if such contract or lease has been assumed under this section or under a plan confirmed

under chapter 9, 11, 12, or 13 of this title [11 USCS §§ 901 et seq., 1101 et seq., 1201 et

seq., or 1301 et seq.]—

(A) if before such rejection the case has not been converted under section 1112, 1208,

or 1307 of this title [11 USCS § 1112, 1208, or 1307], at the time of such

rejection; or

(B) if before such rejection the case has been converted under section 1112, 1208, or

1307 of this title [11 USCS § 1112, 1208, or 1307]

(i) immediately before the date of such conversion, if such contract or lease

was assumed before such conversion; or

(ii) at the time of such rejection, if such contract or lease was assumed after

such conversion.

…

(n)

(1) If the trustee rejects an executory contract under which the debtor is a licensor of a right

to intellectual property, the licensee under such contract may elect—

(A) to treat such contract as terminated by such rejection if such rejection by the

trustee amounts to such a breach as would entitle the licensee to treat such

contract as terminated by virtue of its own terms, applicable nonbankruptcy law,

or an agreement made by the licensee with another entity; or

(B) to retain its rights (including a right to [to] enforce any exclusivity provision of

such contract, but excluding any other right under applicable nonbankruptcy law

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C

to specific performance of such contract) under such contract and under any

agreement supplementary to such contract, to such intellectual property (including

any embodiment of such intellectual property to the extent protected by applicable

nonbankruptcy law), as such rights existed immediately before the case

commenced, for—

(i) the duration of such contract; and

(ii) any period for which such contract may be extended by the licensee as of

right under applicable nonbankruptcy law.

(2) if the licensee elects to retain its rights, as described in paragraph (1)(B) of this

subsection, under such contract—

(A) the trustee shall allow the licensee to exercise such rights;

(B) the licensee shall make all royalty payments due under such contract for the

duration of such contract and for any period described in paragraph (1)(B) of this

subsection for which the licensee extends such contract; and

(C) the licensee shall be deemed to waive—

(i) any right of setoff it may have with respect to such contract under this title

or applicable nonbankruptcy law; and

(ii) any claim allowable under section 503(b) of this title [11 USCS § 503(b)]

arising from the performance of such contract.

(3) if the licensee elects to retain its rights, as described in paragraph (1)(B) of this

subsection, then on the written request of the licensee the trustee shall—

(A) to the extent provided in such contract, or any agreement supplementary to such

contract, provide to the licensee any intellectual property (including such

embodiment) held by the trustee; and

(B) not interfere with the rights of the licensee as provided in such contract, or any

agreement supplementary to such contract, to such intellectual property (including

such embodiment) including any right to obtain such intellectual property (or such

embodiment) from another entity.

(4) Unless and until the trustee rejects such contract, on the written request of the licensee the

trustee shall—

(A) to the extent provided in such contract or any agreement supplementary to such

contract—

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(i) perform such contract; or

(ii) provide to the licensee such intellectual property (including any

embodiment of such intellectual property to the extent protected by

applicable nonbankruptcy law) held by the trustee; and

(B) not interfere with the rights of the licensee as provided in such contract, or any

agreement supplementary to such contract, to such intellectual property (including

such embodiment), including any right to obtain such intellectual property (or

such embodiment) from another entity.

…

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D

Appendix D: 11 U.S.C. § 502. Allowance of Claims or Interests

…

(g)

(1) A claim arising from the rejection, under section 365 of this title [11 USCS § 365] or

under a plan under chapter 9, 11, 12, or 13 of this title [11 USCS §§ 901 et seq., 1101 et

seq., 1201 et seq., or 1301 et seq.], of an executory contract or unexpired lease of the

debtor that has not been assumed shall be determined, and shall be allowed under

subsection (a), (b), or (c) of this section or disallowed under subsection (d) or (e) of this

section, the same as if such claim had arisen before the date of the filing of the petition

(2) A claim for damages calculated in accordance with section 562 [11 USCS § 562] shall be

allowed under subsection (a), (b), or (c), or disallowed under subsection (d) or (e), as if

such claim had arisen before the date of the filing of the petition.

…

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E

Appendix E: 11 U.S.C. § 541. Property of the Estate

(a) The commencement of a case under section 301, 302, or 303 of this title creates an estate.

Such estate is comprised of all the following property, wherever located and by whomever held:

(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable

interests of the debtor in property as of the commencement of the case.

(2) All interests of the debtor and the debtor’s spouse in community property as of the

commencement of the case that is—

(A) under the sole, equal, or joint management and control of the debtor; or

(B) liable for an allowable claim against the debtor, or for both an allowable claim

against the debtor and an allowable claim against the debtor’s spouse, to the

extent that such interest is so liable.

(3) [omitted]

(4) [omitted]

(5) [omitted]

(6) [omitted]

(7) [omitted]

…

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F

Appendix F: 11 U.S.C. § 1501. Purpose and Scope of Application

(a) The purpose of this chapter is to incorporate the Model Law on Cross-Border Insolvency so

as to provide effective mechanisms for dealing with cases of cross-border insolvency with

the objectives of—

(1) cooperation between—

(A) courts of the United States, United States trustees, trustees, examiners, debtors, and

debtors in possession; and

(B) the courts and other competent authorities of foreign countries involved in cross-

border insolvency cases;

(2) greater legal certainty for trade and investment;

(3) fair and efficient administration of cross-border insolvencies that protects the interests of

all creditors, and other interested entities, including the debtor;

(4) protection and maximization of the value of the debtor’s assets; and

(5) facilitation of the rescue of financially troubled businesses, thereby protecting investment

and preserving employment.

…

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G

Appendix G: 11 U.S.C. § 1525. Cooperation and Direct Communication Between the

Court and Foreign Courts or Foreign Representatives

(a) Consistent with section 1501, the court shall cooperate to the maximum extent possible

with a foreign court or a foreign representative, either directly or through the trustee.

…

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H

Appendix H: 28 U.S.C. § 1334. Bankruptcy Cases and Proceedings

…

(e) The district court in which a case under title 11 is commenced or is pending shall have

exclusive jurisdiction—

(1) of all the property, wherever located, of the debtor as of the commencement of such

case, and of property of the estate; and

(2) over all claims or causes of action that involve construction of section 327 of title 11,

United States Code, or rules relating to disclosure requirements under section 327.