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Perlman v. Catapult Entertainment (In re Catapult Entertainment)

United States Court of Appeals for the Ninth Circuit

November 6, 1998, Argued and Submitted, San Francisco, California ; January 28, 1999, Filed

No. 97-16707

Opinion

OPINION

 [*748]  FLETCHER, Circuit Judge:

Appellant Stephen Perlman ("Perlman") licensed certain patents to appellee Catapult Entertainment, Inc. ("Catapult"). He now seeks to bar Catapult, which has since become a Chapter 11 debtor in possession, from assuming the patent licenses as part of its reorganization plan. Notwithstanding Perlman's objections, the bankruptcy court approved the assumption of the licenses and confirmed the reorganization plan. The district court affirmed the bankruptcy court on intermediate [**2]  appeal. Perlman appeals that decision. We are called upon to determine whether, in light of § 365(c)(1) of the Bankruptcy Code, a Chapter 11 debtor in possession may assume certain nonexclusive patent licenses over a licensor's objection. We conclude that the bankruptcy court erred in permitting the debtor in possession to assume the patent licenses in question.

Catapult, a California corporation, was formed in 1994 to create an online gaming network for 16-bit console videogames. That same year, Catapult entered into two license agreements with Perlman, wherein Perlman granted to Catapult the right to exploit certain relevant technologies, including patents and patent applications.

In October 1996, Catapult filed for reorganization under Chapter 11 of the Bankruptcy Code. Shortly before the filing of the bankruptcy petition, Catapult entered into a merger agreement with Mpath Interactive, Inc. ("Mpath"). This agreement contemplated the filing of the bankruptcy petition, followed  [*749]  by a reorganization via a "reverse triangular merger" involving Mpath, MPCAT Acquisition Corporation ("MPCAT"), and Catapult. Under the terms of the merger agreement, MPCAT (a wholly-owned [**3]  subsidiary of Mpath created for this transaction) would merge into Catapult, leaving Catapult as the surviving entity. When the dust cleared, Catapult's creditors and equity holders would have received approximately $ 14 million in cash, notes, and securities; Catapult, in turn, would have become a wholly-owned subsidiary of Mpath. The relevant third party creditors and equity holders accepted Catapult's reorganization plan by the majorities required by the Bankruptcy Code.

On October 24, 1996, as part of the reorganization plan, Catapult filed a motion with the bankruptcy court seeking to assume some 140 executory contracts and leases, including the Perlman licenses. Over Perlman's objection, the bankruptcy court granted Catapult's motion and approved the reorganization plan. The district court subsequently affirmed the bankruptcy court. This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 158(d) and, because the relevant facts are undisputed, review the orders below de novo. See Everex Sys. v Cadtrak Corp. (In re CFLC, Inc.), 89 F.3d 673, 675 (9th Cir. 1996).

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165 F.3d 747 *; 1999 U.S. App. LEXIS 1072 **; 99 Cal. Daily Op. Service 787; 41 Collier Bankr. Cas. 2d (MB) 858; 33 Bankr. Ct. Dec. 1058; Bankr. L. Rep. (CCH) P77,886; 99 Daily Journal DAR 95

In re CATAPULT ENTERTAINMENT, INC., a California corporation, aka Storm Systems, Debtor. STEPHEN PERLMAN, Appellant, v. CATAPULT ENTERTAINMENT, INC., a California corporation, aka Storm Systems, Appellee.

Prior History:  [**1]  Appeal from the United States District Court for the Northern District of California. D.C. No. CV-97-20016 WAI. William A. Ingram, District Judge, Presiding.

Disposition: REVERSED.

CORE TERMS

applicable law, debtor in possession, executory contract, lease, plain language, nondebtor, licenses, assign, legislative history, bankruptcy court, literal reading, provisions, prohibits, statutory language, hypothetical, contracts, patent, words, superfluous, entity, reorganization plan, patent license, inconsistencies, restricts, excuses, terms

Business & Corporate Compliance, Contracts Law, Standards of Performance, Creditors & Debtors, Contracts Law, Types of Contracts, Lease Agreements, General Overview, Bankruptcy Law, Administrative Powers, Executory Contracts & Unexpired Leases, Assignments, Powers to Assume & Reject, Executory Contracts, Real Property Law, Bankruptcy, Leases, Unassumable Contracts, Third Parties, Assignments, Assignment of Obligations, Consent Requirements, Reorganizations, Debtors in Possession, Ownership, Conveyances, Patent Law, Licenses, Governments, Legislation, Interpretation

Business & Corporate Compliance, Contracts Law, Standards of Performance, Creditors & Debtors, Contracts Law, Types of Contracts, Lease Agreements, General Overview, Bankruptcy Law, Administrative Powers, Executory Contracts & Unexpired Leases, Assignments, Powers to Assume & Reject, Executory Contracts, Real Property Law, Bankruptcy, Leases, Unassumable Contracts, Third Parties, Assignments, Assignment of Obligations, Consent Requirements, Reorganizations, Debtors in Possession, Ownership, Conveyances, Patent Law, Licenses, Governments, Legislation, Interpretation