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

Filing 120

NOTICE by Software Rights Archive, LLC re 113 Notice (Other) on the Site Technologies, Inc. Chapter 11 Case (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Kaplan, Lee)

EXHIBIT A

1 G. LARRY ENGEL (BAR NO. 53484)

LEngel(imofo.com 2 VINCENT J. NOVAK (BAR NO. 233003) VNovak(imofo.com 3 MORRSON & FOERSTER LLP 425 Market Street
4 San Francisco, California 94105-2482 Telephone: [phone]

5 Facsimile: 415.268.7522
6 Attorneys for

Sherwood Finance (Delaware), LLC,
7 a plan ofreorganization beneficiary
and a part-in-interest

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UNITED STATES BANKUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION

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In re Site Technologies, Inc.,
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Case

No.

99-50736 RLE

A Chapter 11 reorganized debtor under a
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consummated, liquidating plan. CHATER 11
STATUS CONFERENCE

STATEMENT BY SHERWOOD FINANCE (DELAWARE), LLC
Date: Time: Place:
December 17, 2008
10:30 a.m.

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280 South First Street,

Couroom 3099
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San Jose, California 95113

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Honorable Roger Efremsky

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Sherwood Finance (Delaware), LLC ("Sherwood"), a major beneficiary of the plan of
reorganization (the "Plan") previously confirmed and effective in the above-captioned case (this

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"Case") and a part-in-interest herein, respectfully submits this Status Conference Statement
requesting that the December 17, 2008 hearing to be a status and scheduling conference and
identifying the issues for scheduling in January 2009.1
1 Because the allowed claims of creditors were paid in full by the Debtor prior to the entering of the Final Decree the confirmed and effective Plan are the former (Footnote continues on next page.)
STATUS CONFERENCE STATEMENT

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closing this Case in January 2004, the remaining beneficiaries of

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I.

INTRODUCTION
Sherwood respectfully asks this Court to treat the upcoming hearing as a status and

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scheduling conference pursuant to section 105(d)(I) of

the Bankptcy Code,2 and to create an

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orderly schedule to quickly and fairly resolve the various issues before the Court, including a dispute related to the ownership of certain patents, which is highly relevant to this matter and pending

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litigations in Texas and California involving such patents. See Section II below. On December 2,

2008, the Cour reopened this Case in response to a Reopening Motion fied by Sherwood on
November 26,2008.3 In its Reopening Motion, Sherwood requested that the Court: (a) appoint a
trustee or Responsible Person under the Plan, (b) issue protective orders against what Sherwood
believes to be attempts to convert assets of

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the estate (such as the patents), (c) reaffrm that the

automatic stay under the bankptcy law applies to the Texas and California actions involving the

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patents at issue in this case (or provide injunctive and other equitable relief with respect to these

related cases under section 105), (d) quiet title to the patents at issue in this case, and (e) grant any

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other necessar relief. See Motion at 4 (Docket No. 284). Sherwood requests that the Court establish
deadlines to resolve these issues during the upcoming hearing.
Sherwood does not intend to seek any substantive relief at the hearing; rather, such relief

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wil

be requested at hearings to be scheduled in January. By asking the Court to limit this first hearing to
a status and scheduling conference, Sherwood does not mean to imply any diminished

urgency or .

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(Footnote continued from previous page.) the Debtor. The interests of such "Plan beneficiaries" are measured by reference to their shares of stock, equityholders of
although their shares were

cancelled by the Plan in favor of contract rights to payment under the Plan. As a result, Plan

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beneficiaries who Were formerly equityholders (or their successors-in-interest) are now creditors, with standing ald right to challenge the relevant purported transfers of the patents at issue, such as those repeatedly attémpted by Ait, Egger, and SRA. With respect to the former equity, Plan beneficiary Sherwood holds the rights derived from at least 762,615 former the Debtor's issued and outstanding former approximately 9 percent (9%) of shares of the dissolved Debtor, consisting of shares. Other Plan beneficiaries joined in the Reopening Motion. 2 All references herein to the "Bankrptcy Code" or section references thereto are to Title 11 of the United States Code, as amended.
3 Sherwood's "Reopening Motion" consisted of

the following documents: (a) Sherwood's Ex Party Applicątion

to Reopen Closed Case Pursuant to 11 USc. § 350(b) and Rule soio, and (b) Sherwood's Motion (i) to Reopen Closed

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the Continuing Stay, and (iv) for Other Relief, and the related Request for Judicial Notice and supporting Confintlątion of Declarations. Capitalized terms used, but not otherwise defined, herein have the meanings given them in the Reopening Motion.

Case Pursuįnt to 11 USc. § 350(b) and Rule soio in Order to Protect and Auction Patents Held in Custodią Legis, (ii) to Appoint a Trustee, (iii) for a Status Conference Pursuant to § 1 05( d) to Arrange for Protective Orders and

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1 importance with respect to the challenges confronting this Chapter 11 estate. To the contrary,
. 2 Sherwood has accepted the scheduling adjustment in light of the upcoming holidays, and to

3 accommodate the parties in the Texas and California Actions, including Softare Rights Archive,
4 LLC ("SRA"), the alleged "owner" of

the patents, and Daniel Egger, a former insider of Slash.

5 Sherwood therefore respectfully requests that the Cour use the upcoming hearing as a foru to
6 discuss a process by which the relief sought by Sherwood and the Plan beneficiaries for the

7 Chapter 11 estate can be scheduled to be addressed as soon as possible in January. For the Cour's
8 convenience, Sherwood sets forth its view of the relevant issues to be discussed and scheduled during
9 the upcoming hearing in the following sections.

10 II.
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MATTERS TO BE SCHEDULED AND DISCUSSED AT THE STATUS CONFERENCE

12 Sherwood would like to discuss at this status conference a process and schedule for
13 addressing in January at least the following issues:
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A.

Appointment of aNew Responsible Person.

15 At the status conference, Sherwood would like to discuss a process for appointing a qualified,
16 compatible and cost-effective individual to serve as Responsible

Person under the Plan.

17 Sherwood's Position: Sherwood's position is that the Responsible Person must be one who

18 can protect and sell the patents at issue in this Case (the "Patents") and otherwise perform the Plan
19 for its beneficiaries, which is critical in order to protect rights and to recover benefits to which the

20 Plan beneficiaries are entitled. The person serving in this role wil need substantial expertise in

21 intellectual propert litigation, and have familiarity with bankptcy law and procedure. As
22 discussed in the Reopening Motion, Sherwood believes that Jeffrey Ait, the former Responsible
23 Person now aligned with the estate's adversaries, was discharged of

his duties as Responsible Person

24 upon the closing of the Case and, for the reasons set forth in the Reopening Motion, that Ait cannot
25 serve in this capacity in the futue-thus giving rise to a need for appointment of an appropriate,

26 qualified person. Because the Chapter 11 estate and Plan beneficiaries have been prejudiced by what
27 Sherwood views as unauthorized actions of Ait and others in violation of

the section 362 stay, the

28 Plan, and applicable law, in Sherwood's view it would be inappropriate for any person closely
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1 associated with Ait, Egger, SRA or their counsel to serve in the capacity of

Responsible Person. A

2 process thus is needed to find an estate representative with whom the Plan beneficiaries can work

3 effectively.
4 Sherwood believes the new Responsible Person also should be acceptable to the major Plan
5 beneficiaries, including Sherwood, as well as Google Inc. and lAC Search & Media, Inc, both
6 stakeholders under the Plan and both a Co-Defendant in ongoing litigation over the Patents. If

the

7 Court requires the appointment of a trstee, the Responsible Person also could serve in that role. A

8 process for selecting candidates, as well as for analyzing the natue of the alliances desired by Plan
9 beneficiaries, thus should be discussed at the status conference.

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B.

Enforcement of Automatic Stay or Injunction

and Other Equitable Relief

Pursuant to llU.S.C. § 105.

12 At the status conference, Sherwood also would like to discuss a process for addressing in
13 January the enforcement of

the automatic stay pursuant to section 362 as to:
(1) (2)

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the Patent assets, and
the stock of

Slash (Site/Technologies/Inc.), the Debtor's wholly owned

16 subsidiary, which previously owned the Patents,
17 each of which Sherwood believes is or was propert of the bankptcy estate in custodia legis for the
18 reasons set forth in the Reopening Motion. Sherwood also would like to discuss a process for

19 addressing the protection of the Patents, either by virte of the automatic stay or by injunction

20 pursuant to section 105.
21 Sherwood's Positon: Sherwood's position is that Ait has violated the stay and acted in
22 contravention to the terms of the Plan and against the interests of Plan beneficiaries, and Sherwood

23 would like to discuss a process for promptly addressing this conduct. Sherwood thus would like this . 24 Cour to clarify, pursuant to a schedule to be set at the status conference, that Ait has had no authority
25 to take any action on behalf of the Debtor or the bankptcy estate following the closing of the Case

26 in January 2004. Sherwood also would like the Cour to address, pursuant to the schedule to be
27 determined, the consequences of Aits purorting to act in the name of

the bankptcy estate after the

28 Case had closed, including what Sherwood views to be the fraudulent, purorted transfer of the
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1 Patents in 2008 to Egger and the unauthorized retention of counsel for SRA purportedly to represent

2 the Debtor.

3 Sherwood fuher believes that Egger and SRA are attempting to convert the Patents from the
4 estate. Sherwood also believes that various former insiders and Plan fiduciaries, including Egger and
5 Ait, have engaged in a pattern of unauthorized and wrongful conduct in violation of

the automatic

6 stay, and that their conduct theatens to convert or impair the value, title, and marketability of

the

7 Patents, which threat requires this Court's intervention.

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c.

Quieting Title to the Patents.

9 At the status conference, Sherwood also would like to discuss a process for resolving the

10 issues relating to the title of the Patents.
11 Sherwood's Position: For the reasons discussed in the Reopening Motion, Sherwood

12 believes that the Patents stil remain in custodia legis in the bankptcy estate. The Patents originally

13. were owned by Slash, and Sherwood believes that when the Debtor purortedly sold the Patents to
14 Egger in 1998 for $100,000 before the filing of the Chapter 11 petition, no transfer could have

.15 occurred then, because the Debtor had no interest to transfer at the time. Slash later merged into the
16 Debtor in December 2000, at which point Sherwood believes that the Patents became part of the

17 bankptcy estate, and that any subsequent attempts by Egger to transfer the Patents from the Debtor
18 took place after he was divested of his authority upon the entering of

the Final Decree.

19 As a result, because Sherwood believes that the Patents remain in the estate in custodia legis
20 and therefore must be dealt with pursuant to the Plan, Sherwood would like to discuss process at the
21 statUs conference to resolve these issues. Resolution of issues relating to title of

the Patents is critical

22 for all parties-in-interest in this Case, as well as in the Texas Action and the California Action. This
23 Court thus should address at the status conference the most appropriate means of quieting title to the

24 Patents so that, in Sherwood's view, the Patents can be auctioned for the benefit ofthe Plan
25 beneficiaries, including Sherwood. Such a process would need to involve an adversary proceeding
26 and related discovery and motions in this Cour.
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D.

Discovery.
near-term discovery
STATUS CONFERENCE STATEMENT

Finally, Sherwood would like to discuss a process for resolving a host of

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1 issues in the main Case. In particular, Sherwood would like to discuss at the status conference an
2 appropriate process for addressing discovery issues related to the prior fiduciaries for the Chapter 11
3 estate, such as the firm of

Murray & Muray, former banptcy counsel for the debtor-in-possession

4 and reorganized Debtor. Additionally, Sherwood would like to discuss a process at the status

5 conference to determine the extent, if any, to which information held by former counsel to the

6 Debtor, including Murray & Murray, is stil protected by the attorney-client privilege or any other
7 applicable privileges, and to allow them to cooperate with Sherwood in all other respects. Finally,

8 Sherwood would like to discuss at the status conference the need for coordinated discovery efforts in
9 this Case, including the examination of, and production of documents from, certain key individuals
10 and others pursuant to Rule 2004 of the Federal Rules of

Banptcy Procedure.
the various litigating parties,

11 Sherwood's Position: Faced with conflicting demands of

12 Sherwood understands that Muray & Muray and other relevant professionals (including, for
13 example, Wilson Sonsini Goodrich & Rosati) have requested clarification of

the rights and powers of

14 the competing parties purporting to speak for the estate. Sherwood believes that confusion has arisen,
15 for example, from the

former Responsible Person, Ait, purorting after the Case was closed to hire

16 defendant Egger and SRA's curent counsel as counsel for the Debtor. Issues such as these hinder
17 the parties' discovery efforts, and Sherwood believes that resolving the question of who can speak
18 and act now on behalf of the estate and Plan beneficiaries is one of the highest priorities of the eS,tate

19 so that parties such as Muray & Murray can be confident in cooperating and responding to discovery

20 to the proper representative of the estate.
21 Sherwood also believes that the Debtor has no attorney-client privilege suriving the closing

22 of the Case, and that such professionals are free now to cooperate with Sherwood. The Debtor was to
23 be dissolved pursuant to the terms of

the Plan and was to cease to exist after the case was closed. The

24 Plan provided for no successor in interest. As a result, Sherwood believes that no "client" exists on
25 whose behalf former counsel can assert an attorney-client privilege in connection with discovery
26 efforts. This Cour thus should address such issues directly, pursuant to a process scheduled at the

27 status conference, so that the Debtor's former counsel may respond to discovery freely without the
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waiving any privileges.
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1 Sherwood furher believes that a thorough examination of the significant pre- and post2 petition transactions of Ait, Egger, SRA, and their counsel is critical to the resolution of

the matters

3 discussed herein, including for the purpose of addressing the automatic stay issues and issues relating
4 to title of the Patents, each of which are matters that "affect the administration of

the Debtor's estate."

5 See Rule 2004(b). Sherwood thus would like to discuss the need for such discovery and related
6 issues at the status conference and schedule in January an orderly process by which such issues can

7 be resolved.

8 III. CONCLUSION
9 - Sherwoöd believes that the issues befotethis Cour are ctitical to the effective administration
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this Case and the proper disposition ofthe Patents. As a result, Sherwood would like to discuss a

11 process that provides for relief in January, including setting an appropriate timeframe and set of
12 procedures for resolving the issues relating to the appointment of a Responsible Person, enforcing the
13 automatic stay and section 105, and addressing what Sherwood views as past violations of

the stay,

14 the Plan, and applicable law, quieting title to the Patents in order to facilitate an auction for the

15 benefit of the Plan beneficiaries, and addressing the discovery issues discussed herein.
16 Dated: December 15,2008
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Respectfully submitted,

G. LARRY ENGEL VINCENT 1. NOVAK MORRSON & FOERSTER LLP

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By: lsI G. Larr Engel
G. Larr Engel

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Attorneys for Sherwood Finance (Delaware), LLC, a plan of
reorganization beneficiary and part-in-

interest

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STATUS CONFERENCE STATEMENT

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