Software Rights Archive, LLC v. Google Inc. et al

Filing 118

SUR-REPLY to Reply to Response to Motion re 66 MOTION to Dismiss for Lack of Standing filed by Software Rights Archive, LLC. (Attachments: # 1 Exhibit Table of Exhibits, # 2 Exhibit Exhibit 1, # 3 Exhibit Exhibit 2, # 4 Exhibit Exhibit 3, # 5 Exhibit Exhibit 4, # 6 Exhibit Exhibit 5, # 7 Exhibit Exhibit 6, # 8 Exhibit Exhibit 7, # 9 Exhibit Exhibit 8, # 10 Exhibit Exhibit 8, # 11 Exhibit Exhibit 10, # 12 Exhibit Exhibit 11, # 13 Exhibit Exhibit 12, # 14 Errata Exhibit 13, # 15 Exhibit Exhibit 14, # 16 Exhibit Exhibit 15, # 17 Exhibit Exhibit 16, # 18 Exhibit Exhibit 17, # 19 Exhibit Exhibit 18, # 20 Exhibit Exhibit 19, # 21 Exhibit Exhibit 20, # 22 Exhibit Exhibit 21, # 23 Exhibit Exhibit 22, # 24 Exhibit Exhibit 23, # 25 Exhibit Exhibit 24, # 26 Exhibit Exhibit 25, # 27 Exhibit Exhibit 26, # 28 Errata Exhibit 27)(Duvvuri, Narasa)

Software Rights Archive, LLC v. Google Inc. et al

Doc. 118

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION

SOFTWARE RIGHTS ARCHIVE, LLC,
Plaintiff,
v.

§ § §
§ Civil Action No. 2:07-cv-511-TJW

GOOGLE INC., YAHOO! INC., lAC SEARCH & MEDIA, INC., AOL LLC, and LYCOS, INC.,

§ § §

§ JURY TRIAL DEMANDED
§

Defendants.

§ §

PLAINTIFF'S SUR-RESPONSE TO DEFENDANTS' MOTION TO DISMISS

TABLE OF CONTENTS
PAGE

TABLE OF CONTENTS .............................................................................................................. i
TABLE OF AUTHORITIES ........................................................... ................. ................ .......... iii

I. INTRODUCTION................................................ ............................... .............. ................ 1 ......................................2
II. ARGUMENT AND AUTHORITIES........................................

A. As a Matter of Law, Egger Acquired the Patents in September
1998,

When He Executed a Bil of Sale and Assignment with

Site Tech..................................................................................................................2
1. The Northern District of California Bankruptcy Court

has already found that Egger acquired the patents from Site Tech in September 1998, and reconsideration of
this finding is barred by res judicata. ......................................................2

a. Under the doctrine of res judicata, it is settled as a matter of law that Egger acquired the patents
in September 1998. .........................................................................2
b. Defendants' argument that res judicata does not

apply because there was no adversary
proceeding is wrong. ............................ .................. ........ .... ............6

1

Dockets.Justia.com

c. Defendants' argument that Paragraph 14.2 of

the bankruptcy plan somehow overrules the bankruptcy court's confirmation of Egger's
ownership is also wrong.................................................................6
2. Site Tech owned the patents in September 1998, because

it had acquired them from Site/Tech in July 1997 by
operation of the liquidation provision in Site/Tech's

charter.........................................................................................................7
a. The Northern District of California Bankruptcy

Court has already found that Site Tech acquired the patents from Site/Tech in July 1997, and reconsideration of this issue is barred by res
judicata............................................................................................7
b. The terms of the liquidation provision

demonstrate that it effectuated an automatic
transfer of the patents to Site Tech. .............................................9
3. Even if the patents belonged to Site/Tech in September

1998, as Defendants claim, Egger stil would have
acquired the patents at that time, because Site/Tech was
bound by the Bil of Sale and Assignment. ....................... ............. ...... ..11
a. Site/Tech was Site Tech's alter ego in September

1998................................................................................................11
b. Site Tech was Site/Tech's authorized agent for

purposes of transferring the patents to Egger. ............... ...........14
B. Even If Egger Did Not Acquire the Patents in September 1998,

He Acquired Them as a Matter of Law in December 2000,

When Defendants Claim Site Tech Acquired Title Thereto. ...........................15
1. Defendants' claim that title does not pass immediately

and automatically to the assignee under the afteracquired title doctrine is wrong. .......................................................... ...15
2. Defendants' claim that the bankruptcy extinguished

Egger's rights is wrong............................................................................16
a. The Bil of Sale and Assignment were not

executory contracts and were not rejected in the Site Tech bankruptcy...................................................................16
b. Even if the Bil of Sale and Assignment were

rejected in the Site Tech bankruptcy, that stil would not extinguish Egger's right to the legal
title to the patents..... .................................................................. ..18
3. Defendants' claim that Egger's supposedly unclean

hands bar application of the after-acquired title
ii

doctrine mischaracterizes Egger's actions, ignores
fundamental requirements of the unclean hands

doctrine, and fles in the face of equity. .................................................22

III. CONCLUSION ............................................................................................................... 25

TABLE OF AUTHORITIES

Cases
Alcatel USA, Inc. v. DGI Techs., Inc., 166 FJd 772, 796-97 (5th Cir. 1999) .............................. 24
American Bankers Ins. Co. of

Florida v. Maness, 101 FJd 358, 362 (4th Cir. 1996)..................21

Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1576 (Fed. Cir. 1991).......................,......... 19
Burk Royalty Co. v. Robbins Title Ptr, 117 F.3d 1417 (5th Cir. 1997) ........................................19 Bush v. Person, 59 U.S. 82 (1855)................................................................................................20

Calderon v. Commodore Holdings Ltd., 2004 WL 385062, at *1 (S.D.N.Y. Mar. 1,2004) .......21 Cent. Trust Co. v. Shepard, 29 B.R. 928, 932 (BanIa. M.D. Fla. 1983) ...................................... 20 Cherry v. Farmers Royalty Holding Co., 160 S.W.2d 908,910 (Tex. 1942)............................... 15 Chevron Us.A., Inc. v. State, 993 SO.2d 187,2008 WL 4118905, at *14 n.4 (La. Sept. 8,2008) ...................................................................................................................................................15 Coastal Plains, Inc. v. Mims, 179 F.3d 197,205 (5th Cir. 1999) ................................................... 2 Curtis Mfg. Co., Inc. v. Plasti-Clip Corp., 933 F. Supp. 94 (D.N.H. 1995)................................. 20 Faulks v. Kamp, 3 F. 898,901-02 (S.D.N.Y. 1880) .....................................................................19 Frain v. Burgett, 50 N.E. 873, 876 (Ind. 1898) ............................................................................15 Greenley Energy Holdings o/Penn. v. Stone, 110 B.R. 173,180 (Bank. E.D. Penn 1990)........21 Hamilton v. State Farm Fire & Cas. Co., 270 FJd 778, 783-84 (9th Cir. 2001) .......................... 2 Haw v. Graue, 158 B.R. 965, 970(S.D. Tex. 1993)...................................................................... 21 Horton v. Rehbein, 60 B.R. 436, 440-42 (9th Cir. 1986)............................................................. 17
In re Aimster Copyright Litigation, 252 F.Supp.2d 634,655 (N.D.Il. 2002)..............................24

In re Allen, 300 F.3d 1055, 1059 (9th Cir.2002) .......................................................................... 21 In re Barker-Fowler Electric Co., 141 B.R. 929, 938 (Bank. W.D. Mich. 1992).......................21 In re Belmonte, 240 B.R. 843, 851 (Ban. RD. Pa 1999); In re Walker, 227 B.R. 870,872 (Bankr. S.D. Ind. 1998)............................................................................................................. 17
In re Chattanooga Wholesale Antiques, Inc., 930 F.2d 458 (6th Cir. 1991) .................................. 2

In re Encinas, 27 B.R. 79, 80-81 (Bank. D. Or. 1983)................................................................ 20 In re Forklif LP Corp., 363 B.R. 388, 397 (Bank. D. DeL. 2007) ................................................ 5 California, Inc., 829 F.2d 705 (9th Cir. 1986).............................................. 6 In re Golden Plan of In re Hakim, 244 B.R. 820,822 (Banr.N.D.Ca1.999) ............................................................... 21 In re Int'l Nutronics, Inc., 28 F.3d 965, 969 (9th Cir. 1994); Tally v. Fox Film Corp., 88 F.2d 212,223 (9th Cir. 1937)..............................................................................................................2 In re Kane, 248 B.R. 216,224 (B.A.P. 1st Cir. 2000)..................................................................17 In re Marriage of Perkins, 2004 WL 112598, at *2 (Tex. App.-Amarilo Jan. 23, 2004)......... 18 In re Miler, 253 B.R. 455, 459 (Bankr. N.D. CaL. 2000).............................................................. 5 In re Pardee, 193 F.3d 1083, 1087 (9th Cir. 1999) ........................................................................ 2 In re Snug Enters., 169 B.R. 31,33 (Bank. RD. Va. 1994).......................................................... 5 In re Sugarhouse Realty, Inc., 192 B.R. 355, 363 and fn. 15 (E.D. Pa. 1996) ...............................3

ii

In the Matter of Howe, 913 F.2d 1138, 1147 (5th Cir. 1990).........................................................2 Kaempe v. Myers, 367 F.3d 958, 965 (D.C. Cir. 2004) ................................................................ 25 Kahn v. Gen. Motors Corp., 77 F.3d 457,458-59 (Fed. Cir. 1996) ............................................. 19 Keystone Driler Co. v. Gen. Excavator Co., 290 U.S 240 (1933).............................................. 25 Ligon v. City of Detroit, 739 N.W.2d 900, 906 (Mich. App. 2007) ............................................. 18 Matter of Quality Holstein Leasing, 752 F.2d 1009 (5th Cir.1985) ............................................. 20 Matter ofTTS, Inc., 158 B.R. 583, 584 (D. DeL. 1993) ............................................................... 20 Mils Novelty Co. v. Monarch Tool & Manu! Co. ....................................................................... 16 Mitchel v. Streets, 882 F.2d 233 (7th Cir. 1989)........................................................................... 17 Mitchell Bros. Film Group v. Cinema Adult Theater, 604 F.2d 852,863 (5th Cir. 1979) ........... 24 Morrow v. MicrosoftCorp., 499 F.3d 1332, 1337 (Fed. Cir. 2007) ......................................... 6, 18 Old Republic Insurance Co. v. Currie, 665 A.2d 1153, 1155 (N.J. Super. Ch. 1995) ................. 21 Palmer v. Vogel, 57 B.R. 332 (Bank W.D. Vir. 1986)................................................................21 Pauley Petrol. Inc. v. Continental Oil Co., 239 A.2d 629, 633 (DeL. 1968)................................. 13 Pharm-Eco Lab., Inc. v. Immtech Intl, Inc., No. Civ. A. 18246,2001 WL 220698 (DeL. Ch. Feb.26, 2001) ............................................................................................................................10 Roberts v. Roberts, 241 Fed. Appx. 420, 421-22 (9th Cir. 2007)................................................... 2 Rudaw/Empirical Software Prods. Ltd. v. Elgar Elecs. Corp., 83 B.R. 241,246 (Banr. S.D.N.Y. 1988).........................................................................................................................................19 Security Pacifc Mortg. and Real Estate Services, Inc. v. Canadian Land Co., 690 F.Supp. 1214, 1224 (S.D.N.Y. 1988) ............................................................................................................... 24 Stroh v. Grant, 34 Fed. Appx. 562, 565 (9th Cir. 2002) ........................................................ ......... 2 Superior Crewboats, Inc. v. Primary P & I Underwriters, 374 F.3d 330,334 (5th Cir. 2004) ..... 2
Trulis-v;-B-arton, 107 F.3d 685,691 (9th Cir. 1995)...................................................................2, 7

Us. v. Compean, 2006 WL 1737536, at *3 (S.D. Tex. June 23, 2006) ....................................... 20 Us. v. Whiting Pools, Inc., 462 U.S. 198,204 (1983) ................................................................. 20 Us., Dep't of Air Force v. Carolina Parachute Corp., 907 F.2d 1469, 1474 (4th Cir. 1990).....21
Univ. Bonding Ins. Co. v. Gittens and Sprinkle Enters., Inc., 960 F.2d 366,371 (3rd Cir. 1992)20

Statutes
11 U.S.C. § 1125 ............................................................................................................................. 4 11 U.S.C.A. § 1142.......................................................................................................................21 11 U.S.C.A. § 541(a) .................................................................................................................... 21 35 U.S.C. § 261.........................................................................................................................6, 10 37 C.F.R. § 3.56............................................................................................................................10 Banuptcy Rule 7001 .................................................................................................................... 6 Cal § 2309 .....................................................................................................................................15
DeL. Gen. Corp. Law §§ 275-285................................................._................................................. 11

iv

Plaintiff Software Rights Archive, LLC ("SRA") fies this Sur-Response to Defendants'
Motion to Dismiss.

I. INTRODUCTION
The dispositive question regarding standing in this case is this: Did Daniel Egger acquire
the patents-in-suit? The answer, as a matter of

law, is yes:

. As a matter of law, Egger acquired the patents in September 1998, when he executed

a Bil of Sale and Assignment with Site Technologies, Inc. ("Site Tech").
. The Northern District of California Banruptcy Court has already so found over

eight years ago, and questions relating to a confirmed bankuptcy plan are barred from reconsideration by the doctrine of res judicata.
. Every pary with personal knowledge agrees that Egger acquired the patents from

Site Tech in September 1998.

. Daniel Egger: "I signed (the Bil of Sale and Assignment), Jeff (AitJ signed it,
I paid him the money, I bought the patents. . . ." (Ex. 1, at 45.)
. Jeffrey Ait: "On

September 16, 1998, Site Tech sold and assigned, among other things, U.S. Patent No. 5,544,352, and related applications and future patents. . . to Daniel Egger." (Ex. 2, ii 5.) "At the time of the execution of the 1998 Bil of Sale and Assignment that assigned the Patents to Daniel Egger, I was the CEO of both Site Tech and Site/Tech and was fully
authorized by both companies to assign the Patents to Daniel Egger." (Ex.

2,

ii 6.) Furhermore, "After the July 11, 1997 acquisition, Site/Tech lacked any substantial independent operation or business from that of Site Tech. It did

not design, produce, market, or sell anything, and it had no significant independent costs or revenues." (Ex. 2, ii 2.) "(TJhats what I would classify
as a shelL." (Ex. 3, at 108.)

. Site Tech: "On September 30, 1998 . . . (Site TechJ consummated the sale of
its V -Search technology and related patents. . . . The Company sold the assets relating to V-Search in cash to Daniel (Egger). The Company received a cash 4.) payment of $100,000." (Ex.
. Site/Tech: "After the sale, neither Site Tech entity carried the Patents on their
books

and both recognized the validity of the 1998 Bil of Sale and

Assignment. . . . Site/Tech. . . ratified the 1998 Bil of Sale and Assignment and Site Tech's authority and right to transfer the patents in those documents on behalf of all Site Tech entities a long time ago." (Ex. 2, ii 6.)
. As a matter of law, Egger acquired the patents at the latest in December 2000. Under the after-acquired title doctrine, if an assignor assigns property to an assignee without
1

having title and thereafter acquires title to the property, the property vests in the
assignee at the moment that the assignor acquires title. Here, it is undisputed that Site Tech assigned the patents to Egger in September 1998 and that Site Tech at the latest acquired title to the patents in December 2000.

This issue is ripe for definitive resolution. This Court should find as a matter of law that
Egger acquired the patents, SRA owns the patents, and SRA has standing to bring this case.

II. ARGUMENT AND AUTHORITIES
A. As a Matter of Law, Egger Acquired the Patents in September 1998, When

He Executed a Bil of Sale and Assignment with Site Tech.
1. The Northern District of California Bankruptcy Court has already

found that Egger acquired the patents from Site Tech in September 1998, and reconsideration of this finding is barred by res judicata.
a. Under the doctrine of res judicata, it is settled as a matter of law that Egger acquired the patents in September 1998.
The law is well-settled: "Once a banuptcy plan is confirmed, it is binding on all paries

and all questions that could have been raised pertaining to the plan are entitled to res judicata
effect." Trulis v. Barton, 107 FJd 685, 691 (9th Cir. 1995).1 Likewise, statements in the

debtor's schedules are conclusively binding on the debtor. Superior Crewboats, Inc. v. Primary

P & I Underwriters, 374 F.3d 330, 334 (5th Cir. 2004) (reversing lower court's refusal to bar
debtor's claim because debtor failed to list claim as asset on its banuptcy schedules)?

1 See also In the Matter of

Howe, 913 F.2d i 138, 1147 (5th Cir. 1990); In re Int'l Nutronics, Inc., 28 FJd

965,969 (9th Cir. 1994); Tally v. Fox Film Corp., 88 F.2d 212, 223 (9th Cir. 1937) (barring relitigation of

whether a pre-petition transaction violated securities law because the prior transaction was recognized by
the Trustee and set forth in the bankuptcy petition); In re Pardee, 193 FJd 1083, 1085 (9th Cir. 1999)

("Great Lakes' failure to object to the plan or to appeal the confirmation order constitutes a waiver of its

right to collaterally attack the confirmed plan postconfirmation on the basis that the plan contains a provision contrar to (law)." (internal quotation marks omitted)); In re Chattanooga Wholesale Antiques,
Inc., 930 F.2d 458 (6th Cir. 1991) (holding that although bank was incorrectly treated as secured creditor under confirmed bankruptcy plan, payments made to bank were authorized under bankruptcy plan and
were not avoidable).

2 See also Coastal Plains, Inc. v. Mims, 179 FJd 197,205 (5th Cir. 1999); Roberts v. Roberts, 241 Fed. Appx. 420, 421-22 (9th Cir. 2007) (barring debtor from asserting that creditor lacked standing because
debtor listed creditor in its schedules); Stroh v. Grant, 34 Fed. Appx. 562, 565 (9th Cir. 2002) (barring

debtor from asserting that it owned an interest in a partnership after failing to list the parnership interest in its schedules); Hamilton v. State Farm Fire & Cas. Co., 270 FJd 778, 783-84 (9th Cir. 2001) (barring
2

Here, Defendants' entire standing challenge may be rejected as a matter of law based on

this undisputed fact: Site Tech's bankruptcy filings repeatedly and explicitly represented to the
bankuptcy court, to creditors, and to interested parties that neither it nor Site/Tech possessed any
interest in the patents, but that Site Tech had transferred the patents to Egger in September 1998.3

In its court-approved First Amended Disclosure Statement, Site Tech wrote, "In September
1998, the Company also sold its V-Search technology and related patents." (Ex. 5, § 5.5; Ex. 6,
at 2.) Again, in its Statement of Financial Affairs, it listed under penalty of

perjury:

10. other trsfrs

None a. LIst all other property, other than property transferred In the ordinary course of business or
o financial affairs of the debtor, transferred either absolutely or as security within one year Immediately preceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must

Include transfers by either or both spouses whether or not a Joint petition Is flied, unleSS the spouses are
separated and a joint petition Is not flied.). .

DESCRIBE PROPER1Y
NAME AND ADDRESS OF TRANSFEREE, RELATIONSHIP TO DEBTOR

TRSFERRED
DATE

AND VALUE RECEIVED

savoir Technology Group, Inc. 254 Hacienda Avenue campbell, CA 95008

12/28/98 $150,000 1/29/99 $ 50,000

security interest in all assets

Daniel Eger 2027 W. Club Blvd.
Durham, NC 27705

pi

9/15/98

$80,000 V-Search Technolog

d"

t

(Ex. 7.) This is a verified statement that Egger acquired the patents before the bankruptcy and

that the patents had belonged to Site Tech, not Site/Tech. Finally, in its Schedules, Site Tech
deliberately excluded the patents-in-suit from the lists of curent property of the estate, even

though it included every other patent asset it acquired from Site/Tech. (Ex. 9, at 3.) Site Tech

never amended its schedules following its merger with Site/Tech to reflect any claim of
debtor from asserting that it had a cause of action because it failed to list the policy as an asset on its
bankruptcy schedules). 3 In determining the provisions and meaning of a plan for purposes of res judicata, the court considers the

disclosure statement and any other bankrptcy filings incorporated into the plan or confirmation order. In re Sugarhouse Realty, Inc., 192 B.R. 355,363 and n.l5 (E.D. Pa. 1996) (citing multiple cases). The Plan (Ex. 8, at 1) specifically refers to the Disclosure Statement for a prior history of the Debtor's transactions and for the creditor in deciding whether to accept the plan.
3

ownership of the patents or any recognition that the patents became part of its banuptcy estate.
(Ex.

6.)

Thus, Site Tech's bankuptcy filings definitively raised the issue in the bankuptcy
proceedings of who owned the patents, and the responsibility fell on Site/Tech and the other
parties, to the extent they disagreed with Site Tech, of objecting to the bankruptcy plan and other

filings and asserting that the transfer to Egger in September 1998 was defective and/or that
someone other than Egger rightfully owned the patents. It is undisputed that neither Site/Tech

nor anyone else objected to Site Tech's plan, disclosure statement, and schedules, and it is

further undisputed that the Northern District of California Banuptcy Court relied on the
banptcy record and entered a confirmation order in the case.4 This being so, as a matter of
law the bankuptcy court order and other filings, along with the administration of

the bankuptcy,

bind Site Tech and Site/Tech and operate as a final judgment regarding Egger's acquisition of
the patent in September 1998.5 Further consideration of the issue is bared by res

judicata.

Application of res judicata is particularly appropriate here because neither Site Tech nor

Site/Tech has ever contested the September 1998 assignment to Egger. Rather, both have
repeatedly affirmed the validity and operation of that transaction. Indeed, Jeffrey Ait, the CEO

of Site Tech and Site/Tech and the Responsible Person under the Site Tech bankptcy plan, has

submitted testimony to these proceedings and executed fuher conveyances in support of
Egger's ownership of the patents. Further, application of the doctrine is the only way to avoid

manifest unfairness to Egger and to avoid violating Egger's bankptcy and due process rights.
Egger had a meritorious claim to the patents, having paid $100,000 for them and having received

4 Notably, as required by 11 U.S.C. § 1125, the banptcy court had also previously approved Site
Tech's disclosure statement as containing "adequate information" to enable creditors to decide whether to vote for or against the plan.
Site/Tech as a creditor).)

5 Site/Tech was a creditor that approved the plan and was merged into Site Tech. (Ex. 10 (listing

4

two warranty assignments to them. His acceptance of the plan and decision not to litigate
ownership of the patents or seek modification of the plan was based on the fact that the

bankuptcy plan and schedules all provided that the patents were transferred to him in 1998 and
that no party in interest to the bankptcy contested his ownership of them. Similarly, Egger's

decision not to assert substantial claims against Site Tech for breach of contract and breach of
title waranties, or alternatively, to assert his rights to the patents, was also based on the fact that
the plan recognized his ownership of the patents. Failure to apply res judicata here would deny

Egger notice that his patent rights were being challenged and would deny him an opportunity to
assert his rights in the bankptcy, to oppose or modify the plan, or to seek allowance of a claim

against Site Tech for the substantial breach of contract/title waranty damages he suffered.6
In contrast, giving preclusive effect to the banptcy cour's recognition that Egger had

acquired the patents would create no unfairness to Site Tech's other creditors or interest holders,
because all those parties were given notice of the assignment to Egger at

all stages of the

banptcy process. Furthermore, Site Tech's general unsecured creditors received payment in

full, with additional funds flowing to equity. (Ex. 5.) Failing now to afford the preclusive effect

to the Egger assignment would entitle Egger to a substantial claim against the estate for the
failure to deliver his patents, threatening the significant recovery already received by creditors

6 In re Snug Enters., 169 B.R. 31, 33 (Bankr. E.D. Va. 1994); In re Forklif LP Corp., 363 B.R. 388, 397
(Bankr. D. DeL. 2007) (holding that it would be unfair to deprive creditors of their rights "where plan provisions do not explicitly take those rights away. If a plan explicitly puts a creditor on notice that it is in
danger oflosing its rights and the creditor fails to act to protect its rights, then rigid application of

the plan

seems justified. However, where it is more difficult or impossible for the creditor to realize that the Plan threatens its statutory rights, it is inequitable to punish the creditor for failing to object."); In re Miler, 253 B.R. 455, 459 (Bankr. N.D. CaL. 2000) (holding that if a confirmed bankrptcy plan is ambiguous as whether a debt is discharged, "(tJhe ambiguity in the plan should be resolved against the Debtor because Debtor drafted the plan.").
5

and

junior equity holders. (Ex.

6.)7

Therefore, it is settled under res judicata that Egger acquired the patents from Site Tech
in September 1998. On this basis alone, this Cour should rule as a matter of law that Egger

owned the patents-in-suit, that SRA owns the patents, and that SRA possesses standing to bring
this case.
b. Defendants' argument that res judicata does not apply because

there was no adversary proceeding is wrong.

Defendants assert that res judicata does not apply to Egger's ownership of the patents
because no adversary proceeding occurred as to the issue. (Ex. 11, at 25.) Defendants are

wrong. The case Defendants themselves cite, In re Golden Plan of California, Inc., 829 F.2d
705 (9th Cir. 1986), as well as Banptcy Rule 7001, directly contradict Defendants' position.

Golden Plan and Banuptcy Rule 7001 only restrict a debtor or trustee from setting aside a
creditor's (such as Egger's)

property rights without giving the creditor an opportunity to defend

himself in a proceeding. (This is a further significant reason why the bankrptcy plan could not

have divested Egger of the patents.) Neither Golden Plan nor Bankptcy Rule 7001 prevents a

debtor from agreeing to recognize a creditor's valid property rights. Debtors and trustees
routinely accept claims and liens and concede property rights when putting forward a plan,

setting forth schedules of assets and transfers, abandoning property, and administering a

bankptcy. These determinations are conclusively binding on the debtor without any need for
an adversary proceeding.
c. Defendants' argument that Paragraph 14.2 of the bankruptcy

plan somehow overrules the bankruptcy court's confirmation
of Egger's ownership is also wrong.

7 The writing requirement of 35 U.S.C. § 261 provides no obstacle to the transfer of

patents by virte of a

bankruptcy, bankrptcy plan, or proceeding in equity. See Morrow v. Microsoft Corp., 499 F.3d 1332, 1337 (Fed. Cir. 2007).
6

Defendants argue that, despite the bankptcy court's confirmation of Egger's rights,
Paragraph 14.2 of

the bankuptcy plan vests the patents in Site Tech free and clear of any claim

by Egger. Defendants are wrong. Paragraph 14.2 provides that "all property of

the debtor" wil

revest in the debtor free and clear of creditors' and interest holders' claims on the "Effective
Date" of the plan. (Ex. 8., at 19.) The "Effective Date" of the plan was July 16, 2000.8 Thus,

Site Tech's property as of July 16, 2000 revested free and clear on that date. Defendants
themselves admit, however, that Site Tech did not own the patents on July 16, 2000. Rather,

under Defendants' argument, Site Tech acquired the patents only on December 21,2000, when it

merged with Site/Tech. (Ex. 12.) Paragraph 14.2 therefore could not have operated to vest the
patents free and clear in Site Tech.
2. Site Tech owned the patents in September 1998, because it had

acquired them from Site/Tech in July 1997 by operation of the
liquidation provision in Site/Tech's charter.
a. The Northern District of California Bankruptcy Court has already found that Site Tech acquired the patents from

Site/Tech in July 1997, and reconsideration of this issue is
barred by res judicata.

As noted above, it is well-settled that "(0 Jnce a bankuptcy plan is confirmed, it is

binding on all parties and all questions that could have been raised pertaining to the plan are
entitled to res judicata effect." Trulis, 107 F.3d at 691. This principle mandates that this Court
uphold the Northern District of

California Bankuptcy Court's finding that the patents transferred

in liquidation from Site/Tech to Site Tech in July 1997. Site Tech's bankuptcy disclosure
statement expressly indicates that intellectual property of Site/Tech transferred to Site Tech
through the July 1997 acquisition: "In July 1997, (Site Tech) acquired the technology to develop

8 The plan defines the Effective Date as eleven calendar days after the Confirmation Date. (Id. at 6:25.)

The Confirmation Order was entered on July 5, 2000. (Ex. 27.) Thus, the Effective Date was July 16,
2000.
7

SiteSweeper 2.0 . . .." (Ex. 5. at § 5.4.) Furher, Schedule B lists products, trademarks, and

patents pertaining to SiteS

weeper and SiteMarks that Site Tech acquired from Site/Tech:

::1. P.wm.:CCP~W"ClI"'

.~~_O.""~'

'._.Inteiiect~ai p.iopert:y :for
.QuickSi.te product, .. si teSweeper product,

i, 000, oòO:ö.õ.'-"--~

Graphic Tools product Trademark heid for SeneSngeeperSiteMaster and it w for , appiicatione p di QuickSite in Europe A11 source fiies for ;~teiiectuai product resides

SiteMaatex product, WebToois product, SiteMarks peoAnimator product and r duct, Wb

~ aL Ei. CA 95066. V80 iey,p'uebioRoad, Sootts
. ----.-.__._.....-.__.

(Ex. 9, at 21.) Site Tech acquired these patents from Site/Tech before the banuptcy, and did so

through the Certificate ofIncorporation liquidation provision in July 1997. Furthermore, neither

Site/Tech nor any other party objected to Site Tech's representations that it had acquired
.Site/Tech's intellectual property, despite the fact that Site Tech sold SiteSweeper and other

intellectual property to Starbase during the banptcy for $8.3 milion. These assets
represented $1 milion of the $1.4 milion of the value of

Site Tech's assets initially set forth in

the schedules. Thus, the sale of these assets represented a substantial amount of the

consideration received by Starbase and resulted in 100% of the creditors' claims' being paid
with interest. (Ex. 5, at 10 and 20.). Furhermore, several contracts related to the marketing and
distribution of Site/Tech's SiteSweeper product were also sold to Starbase. (Ex. 13, at 1-2.)
Thus, the banptcy plan and the principal distributions in the banptcy relied heavily

on the effcacy of the July 1997 asset transfer from Site/Tech to Site Tech. Because those
transfers are settled and Site Tech's bankptcy estate has been administered, it is too late now to

challenge, based on supposed defects in documentation, whether in fact Site Tech acquired
particular properties. 11 U.S.c. § 1127(b) (barring modifications of a plan after "substantial

consumation").

8

In short, the bankuptcy order constitutes a final judgment that the liquidation provision

operated to transfer Site/Tech's patent rights to Site Tech, and furher consideration of the issue
is bared by res judicata. On this basis alone, this Court should find as a matter of law that Site
Tech owned the patents when it assigned them to Egger in September 1998, that SRA owns the

patents today, and that SRA possesses standing to bring this suit.

b. The terms of the liquidation provision demonstrate that it
effectuated an automatic transfer of the patents to Site Tech.

Defendants claim that no transfer occurred pursuant to the liquidation provision in
Site/Tech's certificate of incorporation, because the liquidation provision did not automatically
transfer the patents, but instead merely set the stage for a transfer that never occurred.

Defendants are wrong. By its very terms, the iiquidation provision effectuated an automatic

transfer of the patents, with no further action necessary, from Site/Tech to Site Tech. The

provision directs, in mandatory language, the distribution of all of Site/Tech's assets: "(TJhe entire remaining assets and funds of the corporation legally available for distribution, if any,
shall be distributed ratably among the (preferred stockJholders . . . . Thereafter, any remaining

assets and funds legally available for distribution hereunder shall be distributed solely to the
holders of

the Common Stock." (Ex. 14 (emphasis supplied).) And it spells out in precise terms

exactly how the distribution is to be effectuated-first, a "ratable" distribution, and then, a
distribution of all remaining assets "solely" to Site Tech, the sole remaining stockholder. It thus
resembles the self-executing provisions in Akazawa v. Link New Technology International Inc.,
520 F.3d 1354 (Fed. Cir. 2008), and Sky Technologies, LLC v. SAP AG, No. 2:06-cv-440 (DF)

(E.D. Tex. Aug. 25,2008), which also spelled out precisely how they were to operate and left no
discretion to any

administrator. And it differs from the vague provisions that Defendants cite in

Pharm-Eco Laboratory, Inc. v. Immtech International, Inc., No. Civ. A. 18246, 2001 WL

9

220698 (DeL. Ch. Feb.26, 2001.), which did not specify how the distribution was to occur and
therefore was held not to call for an automatic distribution. (Ex. 11, at 7-8.) Furthermore, under

37 C.F.R. § 3.56, conditional assignments based upon the fulfillment of future condition are

sufficient to transfer patents and are treated as absolute assignments by the PTO. Here, the
liquidation provision mandates a transfer upon fulfillment of a condition: "In the event of any
liquidation . . . distributions to the shareholders of the corporation shall be made . . .." (Ex. 14

(emphasis supplied).) Thus, the presence of a condition subsequent further distinguishes the
liquidation provision from the language in Pharm-Eco Laboratory, where the Cour found that
the clause was merely a statement of future intent to transfer the patent. Likewise, language

describing the transfer of "all assets" is sufficient to transfer patents even though the patents are
not specifically identified. (Ex. 15, at n.8.)
That the liquidation provision effectuated an automatic transfer is further corroborated by

abundant sworn evidence that Defendants have not even attempted to controvert. Jeffrey Ait, the
CEO of Site Tech and Site/Tech following the liquidation, and one of the core parties involved in
the negotiation of

the July 1997 acquisition, affrmed to the SEC no fewer than six times that Site

Tech had acquired the patents through the liquidation-for example: "(The patented technology)

was technology that (Site Tech) acquired in the (Site/Tech) Acquisition." (Ex. 15, at 10.) Ait
likewise subsequently testified under oath that "In this transaction, (Site Tech) directly acquired.
. . all of

the then-existing assets of (Site/Tech), including its patents. . . ." (Ex. 2, ii 2.) In the ten

years since Site Tech's acquisition of Site/Tech and since Ait first made this representation, not

one Site/Tech employee, officer, or director, or any other person with first-hand knowledge of

10

the negotiations in July 1997 ever disputed this sworn testimony. To the contrary, Ait's sworn
testimony stands unchallenged.9

Finally, Defendants argue that the transfer did not occur because no affrmative acts were

taken, as supposedly required by Delaware General Corporation Law §§ 275-285 (wind up and

dissolution provisions). These arguments fail because the transfers occurred by operation of a
mandatory conveyance clause in Site/Tech's certificate of incorporation, not because of an actual
statutory wind up under the DGCL.
3. Even if the patents belonged to Site/Tech in September 1998, as

Defendants claim, Egger stil would have acquired the patents at that

time, because Site/Tech was bound by the Bil of Sale and Assignment.
a. Site/Tech was Site Tech's alter ego in September 1998.

In its opening brief, SRA identified over twenty core commonalities between Site/Tech
and Site Tech that demonstrated that the entities were alter egos in September 1998. (Ex. 15, at
13-14.) Defendants offer various responses, but all of

them crumble under scrutiny.

. Defendants point outthat Site/Tech's 1998 and 1999 tax returns reflect earings

of $18,920 in 1998 and $50,381 in 1999. (Ex. 11, at 16.) Site/Tech did not earn those sums
through any independent business operations, however, but rather acquired them from Site Tech

through a passive internal royalty structure that had been established during the July 1997
acquisition. (Ex. 16, at 17.) Indeed, the tax returns reflect no further revenues, demonstrating

that Site/Tech had no independent operations in 1998 and 1999. Those tax returns also were not

prepared by Site/Tech, but rather by Site Tech, because Site/Tech had no employees of its own.

(Ex. 2, ii 2 ("(T)he former employees of Site/Tech became the employees of Site Tech. . . . Site
9 In its opening brief, SRA also demonstrated that the patents transferred from Site/Tech to Site Tech
pursuant to 35 U.S.C. § 261 and the ratification doctrine. (Ex. 15, at 11-13) Defendants' sole response was the response addressed here-that the liquidation provision did not operate to transfer the patents to Site Tech. Because, as already explained, Defendants are wrong, and the liquidation provision did in fact
operate to transfer the patents to Site Tech, Defendants' § 261 and ratification arguments faiL.
11

Tech maintained Site/Tech's tax records.") Furher, the tax returns were prepared not in 1998
and 1999, but in 2001, because it was only in 2001 that anyone even realized that Site/Tech stil
existed. (Ex. 3, at 104-05.) Thus, the tax returs actually support a finding of alter ego.
. Defendants also claim that SitelTech "retained offces and three employees in

North Carolina after it became Site Tech's subsidiary. . .." (Ex. 11, at 16.) This claim is false.
As Ait testified, "I agreed to keep (the three employees) employed for one year in North Carolina

but as employees of (Site Tech) not as employees of (Site/Tech)." (Ex. 3, at 107.) Furthermore,

"Site Tech adopted and employed Site/Tech's. . . property as its own . . .." (Ex. 2, ii 2.) Again,
the evidence supports a finding that Site/Tech and Site Tech were alter egos.
. Defendants claim that Site/Tech "released a software product under its name."

(Ex. 11, at 16.) This claim is irrelevant, because it concerns the relationship between Site Tech

and Site/Tech in August 1997 (the date of the release), a mere month after Site Tech's
acquisition of Site/Tech, whereas the operative date for determining alter ego is September 1998,
over a year later. Defendants proffer no evidence that Site/Tech was engaged in any product

development in September 1998. Defendants' claim is also disingenuous, because the press
release on which Defendants rely contains numerous indications that Site Tech was already well

on its way to converting Site/Tech into a shelL. The headline of the press release states,
"DeltaPoint and Site/technologies/inc. deliver SiteSweeper 2.0 . . . ." (Ex. 17.) The press release
also quotes only DeltaPoint employees, evidencing the fact that all of Site/Tech's employees had

already integrated into DeltaPoint. (Ex. 17.) The press release further states that "DeltaPoint
plans to release SiteSweeper 2.0 on the company's Web site," negating Defendants' assertion
that Site/Tech was engaged in business activity. (Ex. 17.) Finally, the press release nowhere

discusses Site/Tech's business, but instead describes DeltaPoints business in a section called

"About DeltaPoint," and also nowhere provide Site/Tech's contact information, but instead
12

provides DeltaPoint's contact information, evidencing the fact that DeltaPoint absorbed

Site/Tech's business operations. (Ex. 17.) Finally, Site Tech's sworn bankuptcy filings and
SEC statements make clear that the released Site Sweeper 2.0 technology was actually a product

of Site Tech, not Site/Tech. (Ex. 5, at 5.4 ("In July 1997, (Site Tech) acquired the technology to
develop SiteSweeper 2.0. . . ."); Ex. 26.)
. Defendants claim that "Ait set the record straight at his deposition, testifying that
Site/Tech was not a shell entity after its

acquisition by Site Tech." (Ex. 11, at 16 (emphasis in

original).) This shamelessly mischaracterizes Ait's deposition testimony. Ait testified only that,
to the extent that a "shell entity" owns no assets whatsoever, and to the extent that Site/Tech did

own "desks, chairs, and computers" following its acquisition by Site Tech, Site/Tech was not a

"shell entity" in September 1998. (Ex. 3, at 110.) Ait repeatedly insisted that, under a more
reasonable definition of

"shell entity," Site/Tech was a shell entity in September 1998: "Q.

Wouldn't you agree, based on what we have seen here today, Mr. Ait, that (Site/Tech) was not a

shell entity Ín 1998 or 1999? A. No, I don't agree with that. There was no business carried out
by (Site/Tech). . .. Q. ... (Y)our opinion and belief, as you sit here today under oath, was that

(Site/Tech) was a shell entity in 1998? A. Yes, (Site/Tech) was a wholly-owned subsidiary that

did no business. I don't know what you classify as a shell but that's what I would classify as a
shelL." (Ex. 3, at 108.)
. Finally, Defendants note that Site Tech and Site/Tech did not "intentionally user)

their corporate structure to defraud Egger." (Ex. 11, at 17.) Delaware law does not require fraud
to demonstrate alter ego, however, but instead requires only one of several types of injustices:

"(C)orporate entities. . . may be disregarded. . . . in the interest of justice, when such matters as

fraud, contravention of law or contract, public wrong, or where equitable consideration among
members of

the corporation require it, are involved." Pauley Petrol. Inc. v. Continental Oil Co.,
13

239 A.2d 629, 633 (DeL. 1968). Here, the corporate distinction between Site Tech and Site/Tech

should be disregarded in the interest of justice, to prevent contravention of contract, and in view
of equitable considerations. Site/Tech had no independent ownership, directors, offcers,

employees, property, offces, business dealings, business deparments, financial statements,
headquarters, products, corporate records, bank accounts, director meetings, shareholder

meetings, or operations in September 1998, when Egger bought the patents. (Ex. 2, iiii 2-3.)

Site/Tech was essentially an empty shell completely controlled by Site Tech. (Ex. 2, ii 2.) Site

Tech represented-and to this day affirms through Ait -that it owned the patents-in-suit. (Ex.
2, ii 5.) Egger paid $100,000 out of

his personal funds for the patents, and Site Tech accepted the

money. (Ex. 2, ii 5.) Site Tech warranted that "it hereby transfers good and marketable title to

the Purchased Assets." (Ex. 18.) Both Site Tech and Site/Tech intended the patents to be
assigned to Egger, and Site/Tech authorized Site Tech to execute the assignment. (Ex. 2, ii 6.)

Site Tech affirmed to the SEC that it had sold the patents to Egger. (Ex. 4.) On behalf of both
Site Tech and Site/Tech Ait also ratified the assignment and disclaimed ownership of the patents

in Egger's favor. (Ex. 2, iiii 6-7.) Nobody with any interest in the patents has ever disputed the
assignment. To strip Egger of his patent rights would be contrary to every pary's intentions,

contrary to contract, and contrar to every party's stated interests.
b. Site Tech was Site/Tech's authorized agent for purposes of

transferring the patents to Egger.

In its opening brief, SRA demonstrated that Jeffrey Ait, the CEO of Site Tech and
Site/Tech in September 1998, signed the Bil of Sale and Assignment and assigned the patents to
Egger on behalf of both entities. Defendants now argue that Ait was wearing only his

"Deltapoint hat" when executing the assignment and therefore could not have bound Site/Tech.
(Ex. 11, at 20.) Defendants misstate the facts. Ait's detailed testimony demonstrates that he

14

wore both his "Site Tech hat" and his "Site/Tech hat" while negotiating, executing, performing,
and discussing the assignment to Egger. (Ex. 2, ii 6-7.) Through the Bil of Sale and

Assignment, he granted Site Tech the authority to assign the patents to Egger on Site/Tech's
behalf.

10 Through repeated representations on Site/Tech's behalf before, during, and after the

assignment, he led Egger to believe that Site Tech possessed authority to assign the patents in its

own name. And through the Bil of Sale and Assignment, through representations to Egger,
through statements made to the SEC, and through sworn testimony given thereafter, he ratified,
on SitelTech's behalf, Site Tech's assignment of

the patents to Egger.

B. Even If Egger Did Not Acquire the Patents in September 1998, He Acquired

Them as a Matter of Law in December 2000, When Defendants Claim Site Tech Acquired Title Thereto.
1. Defendants' claim that title does not pass immediately and

automatically to the assignee under the after-acquired title doctrine is wrong.
Defendants argue that after-acquired title does not transfer immediately and automatically

to the assignee under the after-acquired title doctrine, and therefore, Daniel Egger could not have

acquired the patents without banptcy cour intervention. Defendants' assertion is contrary to
hornbook law. After-acquired title conveys to the assignee eo instante-at the instant that the
i1 assignor acquires the title-and automatically, without any court intervention.

10 California Civil Code § 2309 deals with conferring actual authority where the part asserts that it was

an explicit agent for the principaL. This would not have application to SRA's apparent or ostensible authority theories of agency which pertain to situations where there is not an explicit agency agreement.
Furthermore, even assuming that, as Defendants contend, the "equal dignities rule" called for Site/Tech to confer authority on Site Tech in writing, Site/Tech's conferral of authority on Site Tech comported with
this rule.

11 See, e.g., Cherry v. Farmers Royalty Holding Co., 160 S.W.2d 908, 910 (Tex. 1942) ("The Court of

Civil Appeals held that. . . the mineral interests. . . passed eo instante to the defendants. By such holding it applied the familar rule known as the doctrine of after-acquired title. . . ." (citations omitted)); Chevron U.S.A., Inc. v. State, 993 So.2d 187, 2008 WL 4118905, at *14 n.4 (La. Sept. 8,2008) ("(T)itle to propert sold to another by a vendor who only later acquires title vests immediately upon sale in the vendee." (citations omitted)); Frain v. Burgett, 50 N.E. 873, 876 (Ind. 1898) ("The title acquired by the grantor who has conveyed by warranty inures eo instanti that he gains the title to his grantee, and vests in
15

2. Defendants' claim that the bankruptcy extinguished Egger's rights is

wrong.
a. The Bil of Sale and Assignment were not executory contracts

and were not rejected in the Site Tech bankruptcy.
Defendants argue that the bankruptcy extinguished Egger's rights to the patents, because

it rejected the Bil of Sale and the Assignment. Defendants are wrong. As a threshold matter,

the Assignment was a separate agreement from the Bil of Sale, because it was a conveyance
12 (Ex. 18.) While the Bil of Sale
instrument with its own signature, and it was never rejected.

appears on the schedule of executory contracts, the Assignment does not. See Schedule G
Executory Contracts and Leases. This stands to reason, since only the Bil of Sale contained an
executory software license agreement with Site Tech as licensor. (Ex.l8, § 7.) The debtor listed

all of its licenses as executory contracts. (Ex. 19.) The Assignment is a conveyance instrument
that was not executory and therefore was not scheduled as an executory contract and could not be
rejected as an executory contract.

Under § 365 of the Banptcy Code, bankptcy cours may only reject "executory"
him." (citations omitted)); Corpus Juris Secundum (Estoppel) § 25 (2008) ("As a general rule, estoppel vesting after-acquired title in the grantee automatically and instantly, by operation oflaw, has the effect of without further conveyance and without the intervention of any court." (citations omitted)). Defendants misread Mils, wrongly attributing a quote as pertaining to the after-acquired title doctrine when it actually pertains to fraudulent transfer. Mils Novelty Co. v. Monarch Tool & Manu! Co., 49 F.2d 28 (6th Cir. 1931) ("(T)hrough fraud or mistake, a grant is made to A which should have been made to B . . . ."). In fact, immediately following Defendants' cited passage, Mils itself recognizes that title immediately in the patent application context. See id. This idea of immediate transfer is what transfers Mils reasoned "should be deemed to rest upon the principles by which a deed with warranty wil convey in law (i.e., legal title) an after-acquired title." See id. Defendants also misread Taylor Engines, Inc. v. All Steel Engines, Inc., 192 F.2d 171, 174 (9th Cir. 1951). Defendants rely on dictum stating that "(t)he equitable claim of the Nevada corporation could have been cut off by a sale to a bona fide purchaser." (Defs.' Reply, at 27.) This dictum is inapposite because a bonafide purchaser for value can "cut off' a claim by any earlier assignee, whether that assignee obtains full legal and equitable title, or only the latter. See 35 U.S.C. § 261. Moreover, California courts have adhered to the eo instante rule both before and after Taylor. See Brush Elec. Co. v. Calif Elec. Light Co., 52 F. 945, 963 (9th Cir. 1892) ("The sale of a patent right contains an implied waranty as to title, and an after-acquired title obtained by the vendor
inures to the vendee."). In fact, the California legislature has codified the doctrine in the real propert
context. See CAL. Civ. CODE § 1106 (2008).

12 The Bil of Sale was executed by Jeffrey Ait as Chief Executive Officer of Site Tech. The Assignment

was separately executed by Sharon Fugitt as secretary of Site Tech.
16

obligations of the debtor, and federal law defines an "executory" obligation as one "on which

performance is due to some extent on both sides." Horton v. Rehbein, 60 B.R. 436,440-42 (9th
Cir. 1986). Bankuptcy law holds that "executory contracts are those in which the obligations of
both parties are so far unperformed that the failure of either to complete performance would
constitute a material breach excusing the performance of

the other." Id.

Furthermore, both the Bil of Sale and the Assignment contain language of complete and

immediate assignment of full legal title to the Patents to Egger. Under bankruptcy law, an
unperformed obligation to convey legal title is not an executory obligation. See Horton, 60 B.R.

at 441 (9th Cir. 1986) ("The fact that a vendor retains legal title and must in the future convey it

to the debtors does not render the contract executory any more than the duty of the holder of a
promissory note to return the note when the debt is satisfied makes it executory" (internal

quotation marks omitted)); see Mitchel v. Streets, 882 F.2d 233 (7th Cir. 1989) ("In our view, the

delivery of a legal title is a mere formality and does not represent the kind of significant legal
obligation that would render the contract executory."); In re Kane, 248 B.R. 216, 224 (1st Cir.

2000); In re Belmonte, 240 B.R. 843, 851 (Bank. E.D. Pa 1999); In re Walker, 227 B.R. 870,

872 (Bank. S.D. Ind. 1998). In Horton, the Ninth Circuit specifically considered whether a
contract for deed's unperformed conveyance oflega1 title was an executory obligation:

As a practical matter, the vendor performs no duties after the execution and
deposit of title documents with the escrow agent. The vendor cannot terminate the agreement and recover possession of the property unless there is a material breach by the buyer. Unless a contract is executory on both sides, it canot be an executory contract.

60 B.R. at 440. The Assignment is an absolute conveyance that forever relinquishes title to the
Patents. As in Horton, once the deed was placed in escrow, no fuher action was required of

Site Tech, and legal title would be transferred by operation of law and beyond the control of the

17

debtor.13 Further, Egger took possession of the patents and continued to prosecute the

14 Under
applications, pay the legal bils, and improve the property by obtaining two new patents.

Horton, the Assignment was not an executory contract by reason of any unperformed duty to

convey legal title, and was not and coüld not be rejected by Site Tech.
b. Even if the Bil of Sale and Assignment were rejected in the
Site Tech bankruptcy, that stil would not extinguish Egger's

right to the legal title to the patents.
Even if the Bil of Sale and Assignment were rejected in the Site Tech bankruptcy, that

stil would not bar operation of the after-acquired title doctrine. This is because-it is
undisputed-Egger acquired

at least equitable title to the patents through the Bil of Sale and

Assignment. See Morrow v. Microsoft Corp., 2004 WL 1781010, *4 (N.D. CaL. 2004) C'Even if

the patentee's transfer of rights does not vest legal title in the successor, it may constitute a
transfer of equitable title."). The subsequent rejection of contracts in 2000 does not change the
fact that Egger had already received equitable title in 1998.

Equitable title is not merely an equitable claim; it is a vested property right in the grantee.

See Ligon v. City of Detroit, 739 N.W.2d 900, 906 (Mich. App. 2007) ("(T)his equitable interest.

. . was a preexisting vested property right"); In re Marriage of Perkins, 2004 WL 112598, at *2

(Tex. App.-Ararilo Jan. 23, 2004) ("(E)quitable title is a property right."). It is transferred at
the moment that a conveyance with warranty of

title is executed. See Cook v. Us., 37 Fed. Cl.
acceptance of

435,440 (Fed. Cl. 1997) ("(T)he date of

the purchase price. . . is the legal date of

vesting of equitable title, a protected property right."); Burk Royalty Co. v. Robbins Title Ptr, 117
13 In situations where legal title had not yet been conveyed, delivery of legal title has been described as a

"mere formality," and not "the kind of significant legal obligation that would render the contract executory." See Mitchell v. Streets, 882F.2d 233, 235 (7th Cir. 1989). While some cases in other
jurisdictions hold that conveyance of been executed as of the date of

title can be executory, in those cases, no conveyance instrument had
fiing, which is a substantial act ofpedormance required of

the seller. It is

undisputed that the assignments occurred here long before filing, and were listed on the bankruptcy

schedules available to all interested parties. 14 Horton, 60 B.R. at 441 and n. 5 (noting possession and improvement to the propert as a relevant fact).
18

F.3d 1417 (5th Cir. 1997). It may be transferred to third paries. See Faulks v. Kamp, 3 F. 898,

901-02 (S.D.N.Y. 1880). And with it comes the right to receive legal title once the grantor
acquires legal title. See id. The Federal Circuit has repeatedly recognized the doctrine of

is
equitable title with respect to patents.

Under bankptcy law, an assignee who possesses equitable title to property is entitled to

possess the legal title to that property whenever the assignor obtains it, even if the underlying

assignment contract is rejected. Defendants cite no authority for the proposition that a § 365

rejection unwinds an absolute conveyance. To the contrary, a contract is rejected to limit a
debtor's burden for future performance, but does not rescind that which has already occurred.

As one court explained:

Even if the Agreement was executory, Debtor misinterprets the effects of
rejection. Debtor believes rejection wil restore its ownership rights to the

servicing rights, and consequently the ability to resell the rights. . . . A fully
executed contract canot be rescinded. Debtor is attempting, through rejection, to

regain what it has already sold, but without restoring the parties to the status quo ante. Instead of returning the purchase price, Debtor proposes leaving MVB holding a general unsecured claim for $4 milion. Contrary to Debtor's argument,
rejection of an executory contract constitutes a breach of such contract. .

Moreover, rejection does not affect executed portions of an executory contract.

In re DMR Fin. Servs., Inc., 274 B.R. 465, 472 (E.D. Mich. 2002) (internal citations and
modifications omitted); see Rudaw/Empirical Software Prods. Ltd. v. Elgar Elecs. Corp., 83

B.R. 241, 246 (Bank. S.D.N.Y. 1988) ("(R)ejection of an executory contract is not the
equivalent of rescission. . . . (R)ejection does not give the debtor the right to recover property

15 The Federal Circuit recognizes that equitable title to a patent can be conveyed in various circumstances,

commonly including: (1) when a patent is subject to an agreement to assign (see, e.g., Arachnid, Inc. v.

Merit Indus., Inc., 939 F.2d 1574, 1576 (Fed. Cir. 1991)); or (2) where a waranty deed purports to
convey full title, but full title is lacking in the grantor (see, e.g., Kahn v. Gen. Motors Corp.,

77 FJd 457,

458-59 (Fed. Cir. 1996)). The Federal Circuit has acknowledged the following definition of equitable

title with respect to patents: "Equitable title may be defined as "the beneficial interest of one person
whom equity regards as the real owner, although the legal title is vested in another." BLACK'S LAW
DICTIONARY 1486 (6th ed. 1990); see Arachnid, 939 F.2d at 1578 nJ.

19

sold and transferred to the other pary. . . . Such property does not revert to the debtor as a result
of the debtor's rejection of

an executory contract.").

Likewise, under banptcy law, equitable property interests held by assignees do not
become part of the banuptcy estate and therefore canot be extinguished in the bankuptcy:

Property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest. . . sold by the debtor but as to which the debtor retains legal title . . . becomes property of the estate . . . only to the extent of the debtor's legal title to such property, but not to the extent of any equitable
interest in such property that the debtor does not hold.
11 U.S.C. § 541(d); see Curtis Mfg. Co., Inc. v. Plasti-Clip Corp., 933 F. Supp. 94 (D.N.H.

1995) ("Curis, as the owner of a misappropriated patent, would have taken only its legal title to
the patent through the banuptcy proceedings, and thus plaintiffs' equitable interest was neither

encumbered, diminished, nor discharged upon confirmation of the plan.,,).16 Thus, when faced

with the issue of whether a banuptcy debtor that acquired title could hold legal title
notwithstanding a previous conveyance, the Southern District of Texas

held:

Corpus also argues that when the banptcy court dismissed the banptcy, title

to the property re-vested in the Ariagas and became subject to execution by him. Again, he misunderstands the law. Title subsequently acquired by a person who

had previously conveyed that property with waranty instantly passes to the
purchaser. .... Even if the Ariagas did not convey good title at the sale, following the banuptcy, Compean's title was perfected.
us. v. Compean, 2006 WL 1737536, at *3 (S.D. Tex. June 23,2006) (citations omitted). 17

16 See also u.s. v. Whiting Pools, Inc., 462 U.S. 198, 204 (1983); Cent. Trust Co. v. Shepard, 29 B.R.
928, 932 (Bankr. M.D. Fla. 1983) ("Under the Bankruptcy Code, where a debtor holds only bare legal
title to propert without any equitable interest, bare legal title is all that becomes propert of

the estate.");

Univ. Bonding Ins. Co. v. Gittens and Sprinkle Enters., Inc., 960 F.2d 366, 371 (3rd Cir. 1992)
bankrupt's creditors."); Matter of

("(Bankruptcy law) simply does not authorize a trustee to distribute other people's propert among a Quality Holstein Leasing, 752 F.2d 1009 (5th Cir.1985); Matter ofTTS,
beneficial interest being held by another par, that propert is included in debtor's estate only to extent of debtor's legal title to propert, not to extent of any interest in propert that debtor does not hold.); In re

Inc., 158 B.R. 583, 584 (D. DeL. 1993) (holding that when debtor holds only legal title to propert with

Encinas, 27 B.R. 79, 80-81 (Bankr. D. Or. 1983) (same).

17 The Supreme Court's holding in Bush v. Person, 59 U.S. 82 (1855), is consistent with this ruling. In

Bush, the Supreme Court held that under the Bankrptcy Act, the debtor's personal discharge did not
20

Indeed, in this instance, even Site Tech's legal title to the patents-in-suit never becameand never could have become-part of

the bankuptcy estate.18 By Defendants' own argument,

Site Tech did not receive legal title to the patents until December 2000, after the confirmation of
the plan in July 2000. (Ex. 20, at 5.) Property acquired post-confirmation is not property of

the

estate.19 Indeed, the banruptcy estate ceases to exist upon confirmation of a plan and vests in
the debtor?O Furhermore, the automatic stay does not protect post-confirmation assets not
subject to the plan?1 Thus, even under Defendants' theory, neither legal nor equitable title to the
patents became part of

the bankptcy estate, or subject to the automatic stay.22

Thus, Egger's equitable title to the patents-and his right to the legal title to the patents

once Site Tech obtained it-would not have been extinguished in the bankuptcy even if Site
Tech had rejected the Bil of Sale and Assignment. Moreover, Site Tech's legal title to the

patents-which, according to Defendants, it acquired only in December 2000-never became a
affect application of the doctrine of after-acquired title. See id. at 83-84. Even more compelling, in this

matter, the bankruptcy schedules acknowledged and ratified the prior transfer to Egger, and did not sense. Nor was there even a discharge of any kind granted to the debtor. In Old discharge it in any
Republic Insurance Co. v. Currie, 665 A.2d 1153, i 155 (N.J. Super. Ch. 1995), likewise, the court noted that "even if the mortgagor's persona11iabilty for the debt which is secured by the mortgage has been extinguished by bankruptcy, the warranty obligation (under the after acquired propert doctrine) is not
nullfied and he must produce the propert."

18 It should be further noted that since legal title of the Patents was not in the bankruptcy estate, the debtor's strong arm powers as a lien creditor would be inapplicable to Egger's propert interest. 19 See 11 U.S.C. § 541(a) (propert of the estate is "all legal and equitable interests of the debtor in
the commencement of

propert as of

the case"); Am. Bankers Ins. Co. of Fla. v. Maness, 101 FJd 358,
the bankruptcy estate"); Palmer v. Vogel, 57 B.R. 332

362 (4th Cir. 1996) ("Generally, propert not owned at the time of the petition but only subsequently
acquired by the debtor does not become propert of

2°11 U.S.C. § 1142; Haw v. Graue, 158 B.R. 965, 970(S.D. Tex. 1993)("Plan confirmation dissolves the

(Bankr W.D. Va. 1986).

bankruptcy estate"); Greenley Energy Holdings of Penn. v. Stone, 110 B.R. 173, 180 (Bankr. E.D. Penn
1990); Plan, par. 14.2.

21 See u.s. Dep't of Air Force v. Carolina Parachute Corp., 907 F.2d 1469, 1474 (4th Cir. 1990)

("(T)here can be no further application of the automatic stay after confirmation" ); In re Allen, 300 FJd
1055, 1059 (9th Cir.2002); In re Barker-Fowler Electric Co., 141 B.R. 929, 938 (Bankr. W.D. Mich.

1992); In re Hakim, 244 B.R. 820, 822 (Bankr.N.D.Ca1.999)( "In the Chapter 11 context, whether the automatic stay terminates upon operation of law depends on whether or not a plan has been confirmed"). 22 Accord Barker-Fowler, 141 B.R. at 938 (after confirmation of the plan the automatic stay lifts);
Calderon v. Commodore Holdings Ltd., 2004 WL 385062, at *1 (S.D.N.Y. Mar. 1,2004) (same).
21

part of the bankptcy estate and therefore vested immediately and automatically in Egger

pursuant to the after-acquired t