Author: David N. Crapo

Maximizing Bankruptcy Protection in Software and SaaS Agreements

In today’s digital age, cloud computing has lowered the barrier of entry into many marketplaces by providing network access to a shared pool of configurable computing resources. Cloud services allow business to forego upfront capital costs on servers, network infrastructure, and software allowing companies to focus on establishing and differentiating its business instead of worrying about its IT resources. Additionally, it is typically a “pay as you go” service meaning that businesses can scale up or down as needed in real time. However, entrusting a third-party as the sole source of the company’s network, software, and data storage functionality puts the company at risk of losing these services should the provider enter bankruptcy.

Are You an “Applicable Large Employer” Required to “Play or Pay” Under the ACA’s Employer Mandate and the IRS’ Proposed Shared Responsibility Regulations?

In addition to the controversial and much-litigated Individual Mandate, the Patient Protection and Affordable Care Act of 2010 (“ACA”) includes an equally controversial (though not quite as heavily litigated) “Employer Mandate.” The Employer Mandate can be found in new section 4980H of the Internal Revenue Code. Effective for plan years beginning in 2014, “applicable large employers” will face a choice. They must either (i) offer substantially all (at least 95%) of their full-time employees (employees working on average 30 or more hours per week) and their non-spousal dependants “affordable” health insurance providing “minimum essential coverage” and “minimum [actuarial] value” or face potential penalties. If such coverage is not offered penalties apply if any of their full-time employees qualify under the ACA for a premium tax credit or cost-sharing reduction in connection with the purchase of health insurance.

Covenants Not to Sue Are Licenses in Bankruptcy

The ongoing Kodak bankruptcy has engendered interest in understanding the role of IP-related licenses in bankruptcy. The recent decision in In re Spansion also merits consideration. There, following settlement of Spansion’s 2008 ITC patent infringement action against Samsung and Apple, Spansion and Apple entered into a letter agreement in February 2009 whereby Spansion agreed to dismiss its ITC action against Apple and promised to refrain from filing future actions relating to its asserted patents. In turn, Apple agreed to not disbar Spansion as a supplier and to consider Spansion for future products. In March 2009, Spansion filed for Chapter 11 bankruptcy in the Bankruptcy Court for the District of Delaware.