Executory Contracts in Bankruptcy:

Intellectual Property and Intangible Assets

14th Annual ABI Rocky Mountain

Bankruptcy Conference
Denver, Colorado
January 22, 2009

Presented by:
Weston Anson
CONSOR Intellectual Asset Management
800.454.9091 www.consor.com

© 2009 CONSOR

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?
© 2009 CONSOR 2

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 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?
© 2009 CONSOR 3

Bundles of Intangible Assets

Marketing Bundle IT Bundle Technical Bundle
Primary trademark Enterprise solutions Key patents
Corporate name and logo Custom applications Trade secrets
Marketing umbrella Data warehouses Formulae
Sub-brand names Master licenses Packaging technology and sources

Core brand Source code Shapes and sizes

Worldwide trademark Databases Process technology
registration
Copyrights Data mining Design technology
Secondary trademarks Domain names/URLs Proprietary test results
Packaging design and e-Commerce sites Plant and production design
copyrights
Trade dress Third party software tools Product specifications
Characters Credit/payment systems Operating platforms

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 Case Studies

© 2009 CONSOR 5

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)

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 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

© 2009 CONSOR 7

Tower Records

Key Assets:

 Tower Records Global Trademark Portfolio

 www.tower.com e-Commerce Operations
 International Franchise Agreements

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 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)

© 2009 CONSOR 9

Tower Records: Valuation & Auction

Valuation Conclusion Value Comments
'No less than Value' Trademarks and $ 1,650,000 This is, in today's dollars, the
Domain Names net cost of the internally
generated and acquired
intellectual property.

Liquidation Value of Domain Names and $ 1,320,000 In today's dollars, the net value
e-Commerce Perpetual License to of the intellectual property
connected to the e-commerce
Segment use Trademarks in e-
sites
Commerce
Liquidation Value of Perpetual License to $ 1,585,000 In today's dollars, the net value
International use Trademarks in of the intellectual property
assuming only the Franchise
Franchise Segment connection with
Contracts run to their next
Franchise Contracts renewal date.

Auction Outcome: Trademarks, e- $ 4,200,000 Net value of the intellectual

Asset Values Commerce and property sale. After fierce open-
cry bidding war between
International franchise
Caiman Holdings and
agreements RiverWest Brands.

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 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

© 2009 CONSOR 11

Questions & Answers

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© 2009 CONSOR 12