## Facts

- Commerce One, Inc. filed for Chapter 11 relief in the United States Bankruptcy Court for the Northern District of California (Case No. 04-32820 DM).
- In the Chapter 11 case, Commerce One sought to sell significant estate assets consisting of intellectual property, including a portfolio of web-services patents (and related patent rights).
- Commerce One requested entry of an order establishing a court-supervised auction process and setting procedures for parties seeking to submit offers for the web-services patents.
- The requested procedures addressed how potential purchasers could qualify to bid and how bids would be submitted and evaluated in connection with the auction.
- After notice and a hearing in the bankruptcy case, the court entered an order approving the proposed auction procedures for the intellectual-property sale process.

## Issues

1. Whether, in Commerce One’s Chapter 11 case, the bankruptcy court should approve proposed procedures governing a court-supervised auction and the submission of offers to purchase the debtor’s web-services patents as an appropriate method for selling estate property outside the ordinary course of business.

## Decision

- The bankruptcy court approved the procedure for a court-supervised auction of Commerce One’s intellectual-property assets, including procedures for parties wishing to submit offers to buy the web-services patents.
- The order authorized Commerce One to conduct the auction consistent with the approved bidding framework, subject to later court consideration of any final sale approval request.

## Legal Principles

- A debtor in possession may seek to sell property of the estate outside the ordinary course of business under 11 U.S.C. § 363(b), but the sale process is subject to bankruptcy-court approval after notice and a hearing.
- Bankruptcy courts may approve bidding and auction procedures for a § 363 sale when the procedures are designed to produce a fair process that is reasonably likely to yield the highest and best value for the estate.
- Courts commonly approve bidder-qualification requirements, bid-deposit requirements, bid deadlines, and auction rules to ensure that participation is limited to serious bidders and that the process remains orderly and competitive.
- Approval of bidding procedures is typically a pre-sale order governing the process; it does not, by itself, constitute final approval of a specific purchaser or the ultimate sale terms, which are generally addressed in a later sale-approval order.

## Conclusion

In Commerce One’s Chapter 11 case, the bankruptcy court entered an order approving procedures for a court-supervised auction of the debtor’s intellectual-property assets, including rules governing how interested parties could submit and present offers to purchase Commerce One’s web-services patents.


In re Commerce One, Inc., Case No. 04-32820 DM