SNMP Research Int'l, Inc. v. Nortel Networks Inc. (In re Nortel Networks Inc.)

In re: NORTEL NETWORKS INC., et al. Debtors.

SNMP Research International, Inc.

and

SNMP Research, Inc., Plaintiffs, v. Nortel Networks Inc., et al.,andAvaya Inc. Defendants.

Case No. 09-10138(KG)

Adv. Proc. No. 11-53454(KG)

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

February 8, 2016

Chapter 11

(Jointly Administered)

Re Dkt Nos. 285 & 300

MEMORANDUM OPINION¹

The dispute between Plaintiffs, SNMP Research International, Inc., and SNMP Research, Inc. ("SNMP"), and Nortel Networks Inc. and affiliated debtors ("Nortel" or "Debtors") results from Nortel's sale of their business lines (the "Business Line Sales") to various entities. The parties have cross-moved for summary judgment pursuant to Fed.R. Civ. P. 56(a), made applicable by Fed. R. Bankr. P. 7056. SNMP and Nortel fully briefed their motions and the Court heard argument on December 22, 2015. SNMP is "seeking a finding that the Court did not authorize the transfer of any intellectual property that is determined to be owned by [SNMP]." Brief in Support of Plaintiffs' Motion for Partial Summary Judgment, p. 2, n. 3 ("Plaintiffs' Brief"). Adv. D.I. 286. Nortel's motion "addresses [SNMP's] claims for 'profits' from sales of Nortel business lines . . . ." U.S. Debtors' Memorandum of Law in Support of Their Motion for Partial Summary Judgment and in Opposition to Plaintiffs' Motion for Partial Summary Judgment ("Debtors' Brief"), p. 1. Adv. D.I. 301.

FACTS

Debtors filed for relief under chapter 11 of the Bankruptcy Code on January 14, 2009 (the "Petition Date"). Prior to the Petition Date, SNMP and Nortel had entered into a licensing agreement whereby SNMP granted Nortel the right to use SNMP software in Nortel products.

On September 29, 2009, SNMP filed a proof of claim for $22,000 for unpaid software licensing royalties. SNMP thereafter amended its claim seeking $8.4 million. On November 2, 2011, SNMP filed its Complaint in the adversary proceeding alleging copyright infringement, violations of Delaware trade secrets law and breach of contract. SNMP estimated its damages at $86 million. The Complaint also asserted claims against purchasers in the Business Line Sales, including GENBAND, Inc., Avaya, Inc. and Radware, Inc. Thereafter, SNMP filed an Amended Complaint removing GENBANDand others as defendants. Then, on March 24, 2015, SNMP filed a Second Amended Complaint narrowing the defendants to Nortel and Avaya.

The Business Line Sales generated $3.285 billion. The language from the Orders authorizing the sales (the "Sales Orders") follows. SNMP objected to all but one of the Business Line Sales on the ground that Nortel could not sell SNMP's intellectual property.

Radware Sale ("Radware Order")

On March 26, 2009, the Court entered the Radware Order authorizing the sale to Radware, Inc., of the "Layer 4-7," "Alteon load balancer," "Alteon Application Accelerator" business and related contracts. Ch. 11 D.I. 539. Included among the assets sold and which the Court approved were "the Intellectual Property Assets owned by [Nortel] . . . that are used in Products . . . ." Radware Sale Agreement § 2.1(d). Ch. 11 D.I. 353. The SNMP software was not among the assets which the Radware Order authorized. SNMP did not object to the sale.

Ericsson - CDMA LTE Sale ("Ericsson Order")

On July 28, 2009, the Court entered the Ericsson Order approving the sale of CDMA and LTE assets to Telefonaktiebolaget LM Ericsson (publ) ("Ericsson"). The Ericsson Order provided that: "This Order applies only to assets owned by [Nortel]." Ericsson Order, at ¶ 30. Ch. 11 D.I. 1205. SNMP objected, which the Court overruled with the inclusion of the following language in the Ericsson Order:

This Order applies only to assets owned by the Debtors. Consequently, notwithstanding any other provision of this Order or the Sale Agreement to the contrary, the portions of this Order that approve the transfer of assets to the Purchaser free and clear of all liens and other encumbrances, or that modify, enjoin, release or otherwise limit the rights of creditors ofentities transferring assets, apply only to assets owned by the Debtors and do not apply to any assets owned by non-debtor entities.

Ericsson Order, at ¶30.

Avaya Sale ("Avaya Order")

On September 16, 2009, the Court entered the Avaya Order approving the sale of Enterprise Solutions Business to Avaya, Inc. The Avaya Order provided that "This Order applies only to the assets owned by the Debtors . . . ." Avaya Order, ¶ 29. Ch. 11 D.I. 1514. SNMP had objected to the sale, and the parties resolved the objection with the inclusion of the following language in the Avaya Order:

Nothing in this Order authorizes or otherwise provides for the assumption, assignment or rejection, in whole or in part, of any Objecting Party Agreement. Other than the rights and obligations between the parties to the Agreement, nothing herein or in the Agreement shall affect the rights of any party regarding an Objecting Party Agreement, all of which such rights of the Objecting Parties are hereby preserved, including without limitation the right to seek, oppose or support (a) any assumption, assignment or rejection of an Objecting Party Agreement on any legal or factual basis, . . . [and] (d) the assumption by the Purchaser of all obligations and liabilities under any Objecting Party Agreement by virtue of the assumption and assignment of the Objecting Party Agreement under Section 365 and other applicable law . . . .

Id., at ¶ 27.

Hitachi Sale ("Hitachi Order")

On October 28, 2009, the Court entered an Order authorizing the sale of certain assets to Hitachi, Ltd. The Hitachi Order provided that: "The sale of the Purchased Assets pursuant to this Order will vest [Hitachi] . . . with all rights, title and interest of the Debtors to the Purchased Assets . . . ." Hitachi Order, at ¶ 4. D.I. 1760. SNMP's objection was resolved by including the following language in the Hitachi Order:

"Nothing in this Order authorizes or otherwise provides for the assumption, assignment or rejection, in whole or in part, of any supply agreement, intellectual property or license agreement, (each, an 'Objecting Party Agreement') with. . . SNMP Research International, Inc. ([] an 'Objecting Party'). . . [and n]othing [in the Hitachi Order] or in the [Hitachi] Transaction Agreement shall affect the rights of any party regarding any Objecting Party Agreement . . . .

Id.

Ericsson/Kapsch - First GSM Sale (the "Ericsson/Kapsch Order")

On December 2, 2009, the Court entered the Ericsson/Kapsch Order authorizing the sale of "Debtors' right, title and interest in the GSM/GSM-R Business" to Ericsson and Kapsch Carriercom AG. Ericsson/Kapsch Order, at ¶ Introductory Paragraph. Ch. 11 D.I. 2065. SNMP's objection to the sale was resolved by including the following language in the Ericsson/Kapsch Order:

Nothing in this Order authorizes or otherwise provides for the assumption, assignment or rejection, in whole or in part, of any Objecting Party Agreement. Other than the rights and obligations between the parties to the North American Purchase Agreement, nothing herein or in the Agreement shall affect the rights of any party regarding an Objecting Party Agreement, all of which such rights of the Objecting Parties are hereby preserved, including without limitation the right to seek, oppose or support (a) any assumption, assignment or rejection of an Objecting Party Agreement on any legal or factual basis,. . . [and] (d) the assumption by the Purchaser of all obligations and liabilities under any Objecting Party Agreement by virtue of the assumption and assignment of the Objecting Party Agreement under Section 365 and other applicable law . . . .

Ericsson/Kapsch Order, at ¶ 39.

Ciena Sale ("Ciena Order")

The Court entered the Ciena Order on December 3, 2009, authorizing the sale of the Metro Ethernet Networks business to Ciena Corporation. The Ciena Order providedthat "the transfer to [Ciena] of the Debtors' right, title and interest in the Assets pursuant to the [Ciena APA] . . . vests with or will vest in [Ciena] all right, title and interest of the Debtors in the Assets . . . ." Ciena Order, at ¶ 8. Ch. 11 D.I. 2070. SNMP's objection was resolved with the following language:

[N]o intellectual property rights or intellectual property licensed via contracts with SNMP and Nortel are being conveyed or otherwise transferred by the Debtors pursuant to the Order, [the Ciena APA] or Ancillary Agreements. To the extent that the Purchaser elects to have the Debtors assign to the Purchaser any contract with or intellectual property right of SNMP relating to the Assets, the Debtors and Purchaser will do so in accordance with the terms of such contract or applicable license.

Ciena Order, at ¶ 34.

GENBAND Sale ("GENBAND Order")

On March 4, 2010, the Court entered the GENBAND Order approving the sale of the Carrier Voice Over IP and Application Solutions business to GENBAND. The GENBAND Order found that "[t]he Assets sought to be transferred and/or assigned by the Debtors to [GENBAND] pursuant to the Sale Agreement (the 'Purchased Assets') are property of the Debtors' estates and title thereto is vested in the Debtors' estates. GENBAND Order, at ¶ G. Ch. 11 D.I. 2632. Further the "Order applies only to assets owned by the Debtors." GENBAND Order, at ¶ 37. SNMP's objection was resolved by including the following language in the GENBAND Order:

Nothing in this Order or in the [GENBAND APA] or Ancillary Agreements provides for the assumption and/or assignment by the Debtors of any contract or license with SNMP Research International, Inc. ("SNMP") under section 365 of the Bankruptcy Code. To the extent that the Purchaser elects to have the Debtors assign or sublicense to the Purchaser any contract with or license of SNMP relating to the Assets, theDebtors and Purchaser will do so in the accordance with the terms of such contract or applicable license, which may include entering into a new license agreement.

GENBAND Order, at ¶ 44.

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