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11 U.S.C.S. § 541(a)(1) provides that property of a bankruptcy estate includes all legal or equitable interests of the debtor in property as of the commencement of the case. Section 541 is construed broadly to bring any and all of the debtor's property rights within the bankruptcy court's jurisdiction and the umbrella of protections granted by the Bankruptcy Code, and to promote the goal of equality of distribution. Whether an interest claimed by the debtor is property of the estate is a federal question to be decided by federal law; whether and to what extent the debtor has a legal or equitable interest in claimed property is determined by state law.
The Debtor filed a complaint against Bon Dente Joint Venture ("BDJV") seeking six declaratory judgments listed in three counts. Counts I and II seek a determination (i) that the patents and trademarks comprising ThermalPure TM Technology (the "Technology"), as defined in the Patent Purchase Agreement dated January 2, 1997 (the "Patent Purchase Agreement") are property of the bankruptcy estate under section 541 of the Bankruptcy Code; (ii) of the validity, priority and extent of BDJV's secured claim, if any; (iii) that the avoidance under section 544 of the Bankruptcy Code of any BDJV security interest which is unperfected; and (iv) that BDJV's right to future payments under the Patent Purchase Agreement constitutes a prepetition general unsecured claim. Count III seeks a determination that as of the petition date (i) no reversion of the Technology had occurred under the Patent Purchase Agreement and (ii) the Master Agreement negotiated in September 2001 had not become effective. BDJV filed an answer (Doc. No. 6) contesting all of the Debtor's claims for declaratory relief and filing three counterclaims for (i) breach of the Patent Purchase Agreement, (ii) a declaratory judgment that the Master Agreement is valid and (iii) damages for interference with prospective business relations. The Debtor filed Debtor's Motion for Partial Summary Judgment (the "Motion") seeking summary judgment as to Counts I and II of its complaint.
Are the intellectual property rights comprising the Technology property of the bankruptcy estate?
The court concluded that, under the terms of the agreement, the transfer constituted an absolute assignment of title to the debtor; title passed to pre-petition, so the technology was property of the estate. Next, any security interest that might have been created was unperfected and therefore avoided pursuant to the debtor's exercise of its "strong-arm-power" under § 544. Further, any claim that the company had against the debtor constituted a general unsecured claim. The court needed not decide whether a valid security interest existed because, even assuming a valid security interest, it was unperfected and therefore avoidable in bankruptcy.