In Re Telegroup, Inc.

237 B.R. 87, 1999 Bankr. LEXIS 1207, 34 Bankr. Ct. Dec. (CRR) 1058, 1999 WL 613161
CourtUnited States Bankruptcy Court, D. New Jersey
DecidedAugust 11, 1999
Docket09-26994
StatusPublished
Cited by6 cases

This text of 237 B.R. 87 (In Re Telegroup, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Telegroup, Inc., 237 B.R. 87, 1999 Bankr. LEXIS 1207, 34 Bankr. Ct. Dec. (CRR) 1058, 1999 WL 613161 (N.J. 1999).

Opinion

OPINION

WILLIAM F. TUOHEY, Bankruptcy Judge.

This matter comes before the Court upon the Motion of Cygnus Telecommunications Technologies, LLC (“Cygnus”) for an Order Granting Relief from the automatic stay pursuant to section 362(d) of the Bankruptcy Code permitting Cygnus to commence and prosecute against the debtor, Telegroup Inc. (“Debtor” or “Tele-group”), an action for infringement (“the Infringement Suit”) of a patent held by Cygnus relating to a system and method for what is commonly referred to, and discussed more thoroughly herein, as “International Call-Back” (“the Patent”). Specifically, as originally filed, the Motion requested relief from the automatic stay to enable Cygnus to file and serve a Complaint (substantially in the form annexed as Exhibit A to the Motion), in a Federal District Court where venue is proper, which Infringement Suit would seek to enjoin alleged “infringing activity” pending final adjudication of Cygnus’ causes of action and to take all necessary action relating to the prosecution of the Infringement Lawsuit other than the actual enforcement of a money judgment against the debtor’s assets.

Subsequently, as a result of this Court’s approval pursuant to section 363 of the Bankruptcy Code of a May 26, 1999 auction sale of a significant portion of the debtor’s business assets, including the debtor’s International Call-Back business, to Primus Telecommunications, Inc. (“Pri-mus”), it was conceded by counsel for Cygnus that the injunction request as to the debtor’s business would be deemed “moot.” Pursuant to a June 8, 1999 letter to the Court by Cygnus’ counsel, Cygnus now requests a more limited form of stay relief indicating that such relief is necessary “only to permit it to file an action for damages arising on or after the date that the patent was issued, and for related remedies.” Thus, as confirmed by its counsel, at this juncture in the proceedings, Cygnus seeks only to pursue an action for damages arising from and after the date of the post-petition registration of the Patent until the May 26th sale of the debtor’s assets.

In the alternative, Cygnus requests an Order pursuant to 28 U.S.C. § 959(a), declaring the automatic stay does not apply to an action to be commenced by Cygnus to enjoin the debtor’s post-petition infringement of the Patent.

The debtor filed opposition to the within Motion on May 25,1999 and June 18, 1999. The Court heard oral argument on July 13, 1999, at the conclusion of which it reserved decision.

Matters concerning requests to terminate, annul or modify the automatic stay, and matters concerning the allowance or disallowance of claims against the estate as *89 well as other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor relationship, are core proceedings as defined by the United States Congress in 28 U.S.C. § 157(b)(2)(G), (B) and (0) respectively. The within Opinion constitutes this Court’s findings of fact and conclusions of law pursuant to Fed.R.Bankr.P. 7052.

FINDINGS OF FACT

On February 10, 1999 the debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and continues to manage its affairs as a debtor-in-possession pursuant to 11 U.S.C. §§ 1107 and 1108. At the hearing held on July 13, 1999, debtor’s counsel stated to the Court that it was the debtor’s intention to file a liquidating plan in the Chapter ll.(T5). The debtor is a publicly-held holding company which, through itself and its direct and indirect wholly-owned subsidiaries, provides a substantive range of telecommunication services on a global basis. Among the services provided by the debtor is the service referred to herein as International Call-Back 1 which, as defined, “allows a customer to take advantage of the lower long distance telephone call rates in one country when calling from or to another country with higher rates.” (Debtors’ Objections filed May 25 and June 18, 1999). Amongst its business endeavors, it is undisputed that the debtor generated revenues from the sale and provision of long distance telephone service, including International Call-Back to retail customers.

On March 16, 1999, after the debtor had filed for bankruptcy, the Patent (number 5,888,964) describing International CallBack was issued in favor of Cygnus. For purposes of the Motion sub judice, Cygnus maintains that the debtor “has and continues post-petition to generate substantial revenues from ... the Cygnus Patented system and method for International CallBack without Cygnus’ consent.” (Motion of Cygnus, filed may 10, 1999, para. 3). Cygnus further indicates that by a letter dated March 26, 1999, Cygnus notified the debtor of the Patent and alleged infringement and that the debtor has not responded to Cygnus’ demand. For its part, at the July 13th hearing, counsel for the debtor argued that the present actions of Cygnus must be viewed against the proper background. That is, since obtaining its patent, Cygnus has allegedly served numerous telecommunication carriers in the United States with notice that it intends to initiate similar patent infringement suits against them. (T20).

Significantly, the Court has reviewed a Proof of Administrative Claim filed by Cygnus dated June 14, 1999 in the amount of $1,200,000 relating to the alleged patent infringement from March 16, 1999, the date of the issuance of the patent through the present. In addition, from its review of Exhibit A to the Cygnus Motion, the Court notes that in its potential Infringement Suit, Cygnus has included a jury demand. 2

*90 DISCUSSION

The question of obtaining an injunction having become moot in light of the section 363 sale of the debtor’s assets and consequent cessation of substantially all of the debtor’s business, the limited issues before the Court are first, whether, under the circumstances presented, “cause” exists to lift the automatic stay pursuant to section 362(d) of the Bankruptcy Code so as to allow Cygnus to file its Infringement Suit against the debtor seeking monetary damages for alleged post petition infringement of its patent. In the alternative, assuming the Court finds in the negative as to the above, the second, and somewhat more complex issue involves the question of whether or not, pursuant to 28 U.S.C. § 959(a), as cited by counsel for Cygnus, the debtor in possession may be sued for post-petition patent infringement.

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237 B.R. 87, 1999 Bankr. LEXIS 1207, 34 Bankr. Ct. Dec. (CRR) 1058, 1999 WL 613161, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-telegroup-inc-njb-1999.