Sale and Disposition of Troubled Assets in Bankruptcy
Executory Contracts in Bankruptcy: Intellectual Property and Intangible Assets Presented by: Weston Anson CONSOR Intellectual Asset Management 800.454.9091 www.consor.com 14th Annual ABI Rocky Mountain Bankruptcy Conference Denver, Colorado January 22, 2009
Key Valuation and Disposition Questions Does the IP maintain its value in bankruptcy? Are software and patent licenses salable or not? What sort of liquidation discount is experienced when patents, trademarks, copyrights or software licenses are sold in an orderly disposal?
Key Valuation and Disposition Questions How do you value these assets in a liquidation scenario? Is there a formula to establish the descending value of these assets in liquidation? How do you market and dispose of these assets most cost-effectively and time-effectively?
Bundles of Intangible Assets Formulae Data warehouses Marketing umbrella Packaging technology and sources Master licenses Sub-brand names Shapes and sizes Source code Core brand Process technology Databases Worldwide trademark registration Design technology Data mining Copyrights Proprietary test results Domain names/URLs Secondary trademarks Plant and production design e-Commerce sites Packaging design and copyrights Product specifications Third party software tools Trade dress Operating platforms Credit/payment systems Characters Trade secrets Custom applications Corporate name and logo Key patents Enterprise solutions Primary trademark Technical Bundle IT Bundle Marketing Bundle
Collins & Aikman Key Assets: Instrument Panel Skin/Materials/Process Safety Systems/ Invisible Airbag Door (107 patents) Interior Trim (96 patents) Skin Materials and Processes (67 patents) Console/Door Trim (18 patents) Decorative Finishes/Laminates (14 patents) Kinematics/Air Registers/Cupholders (45 patents) Exterior Trim (40 patents)
Collins & Aikman Sale Process: Direct marketing campaign to Tier 1 and Tier 2 automotive suppliers Technology due diligence was highly labor intensive Asset bundles sold individually to multiple buyers for nearly $5 million Total marketing and sale process executed over 9-month period
Tower Records Key Assets: Tower Records Global Trademark Portfolio www.tower.com e-Commerce Operations International Franchise Agreements
Tower Records Problem : Initial auction failed to identify multiple bidders for the intellectual property Solution: Creatively package assets for direct marketing to an expanded universe of potential buyers through vast network of resources: Financial Buyers (e.g. Altitude Capital, Crystal Capital, Ocean Tomo) Strategic Buyers (Viacom, NBC Universal, FYE) Franchise Portals (Franchise.com, Franchise Direct, Franchise Solutions) Entertainment Law Firms (Christensen Glaser, McDermott Will & Emery) Intellectual Property Industry Resources (INTA, LES, LIMA)
Tower Records: Valuation & Auction Net value of the intellectual property sale. After fierce open-cry bidding war between Caiman Holdings and RiverWest Brands. $ 4,200,000 Trademarks, e-Commerce and International franchise agreements Auction Outcome: Asset Values In today's dollars, the net value of the intellectual property assuming only the Franchise Contracts run to their next renewal date. $ 1,585,000 Perpetual License to use Trademarks in connection with Franchise Contracts Liquidation Value of International Franchise Segment In today's dollars, the net value of the intellectual property connected to the e-commerce sites $ 1,320,000 Domain Names and Perpetual License to use Trademarks in e-Commerce Liquidation Value of e-Commerce Segment This is, in today's dollars, the net cost of the internally generated and acquired intellectual property. $ 1,650,000 Trademarks and Domain Names 'No less than Value' Comments Value Valuation Conclusion
Direct Marketing vs. Static Auction Intangibles are unique with few comparables in the marketplace Intangibles require a strategic plan to identify incremental value opportunities Target buyers typically need more information than is offered through static auction Static auctions market the auction, not the specific assets