US Court to Review Elpida Patent Deals - Ask Any Law Question for

By PEG BRICKLEY

As Elpida Memory Inc.?s plan to sell itself to Micron Technology Inc.

for $2.5 billion moves ahead in Japan, unhappy bondholders gained some ground Friday in their effort to establish a beachhead in U.S. Bankruptcy Court.

Judge Christopher Sontchi ruled he will take a second look at patent deals that Elpida, based in Japan, cut with Rambus Inc.

of the U.S. The patent arrangements were earlier approved by the Japanese court that is supervising Elpida?s restructuring.

The Japanese maker of dynamic random access memory chips had argued that Judge Sontchi was bound to go along with what the Tokyo court had to say on the patent arrangement. Lawyers for Elpida cited the principle of comity, or courtesy between the courts of different countries.

According to Judge Sontchi, the U.S. bankruptcy law that is safeguarding Elpida?s U.S. assets while it works out its financial troubles in Japan doesn?t bind him to automatically go along with the Japanese courts on matters involving assets within U.S. borders.

The decision means there will be a trial on whether the Rambus patent sale meets the ?business judgment? standard under U.S. law.

Elpida didn?t respond Monday to an inquiry about whether it intended to appeal the decision. U.S.-based Micron didn?t respond to a request for comment.

The fight in the bankruptcy court was about more than the patents that were sold to Rambus, which specializes in technology that accelerates memory-chip performance. The dispute was a match that might have set ground rules for a bigger fight to come, as bondholders try to throw roadblocks in the way of the sale of Elpida to Micron at a price they believe is ?grossly inadequate.?

By ruling that he is bound to evaluate the patent sale by applying U.S. law instead of just endorsing the Rambus arrangement because the Japanese court had approved it, Judge Sontchi raised hopes among investors that the U.S. court might step in later, when the time comes to seek approval of the sale of Elpida to Micron.

In October, the Tokyo court overseeing the distressed chip maker?s bankruptcy filing cleared the way for creditors to vote on Elpida?s restructuring plan, which depends on the sale to Micron.

A rival bondholder proposal that would have offered voting creditors a second option failed to clear the Tokyo court.

Voting will continue until Feb. 26. If Elpida gets enough support for its plan, it will then ask the Tokyo court for final approval.

But while the Tokyo court is the main arena for the restructuring and deal action, the U.S. Bankruptcy Court in Wilmington, Del., also might have something to say about the sale, Friday?s decision indicates.

When it sought insolvency protection in Japan, Elpida also placed its U.S. assets, such as patents and cash flow from U.S. customers, under the protection of the Delaware court in a Chapter 15 bankruptcy proceeding.

A Chapter 15 filing is designed to smooth the course of international restructurings by shielding the U.S. assets of global companies that are working out their financial troubles elsewhere.

The Delaware bankruptcy court doesn?t have the power to block the sale to Micron. It might, however, have the authority to complicate the sale when it comes to Elpida?s U.S. assets.

Bondholder attorney Christopher Shore of White & Case LLP said at a court hearing that review of the sale documents indicates there will be no deal with Micron if the U.S. assets are tied up in the U.S. Bankruptcy Court.

Write to Peg Brickley at Peg.Brickley@dowjones.com

Source: http://justasklegal.com/u-s-court-to-review-elpida-patent-deals/7731/

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