Jockey Club data service objection delays Thoroughbred Times bankruptcy auction

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An objection from The Jockey Club Information Systems filed on Tuesday will delay an online auction of assets of bankrupt Thoroughbred Times originally scheduled from Jan. 14-18. Bankruptcy court trustee James Rogan had filed notice of the auction to be conducted by the Halfhill Auction Group. Included in the assets of the company were databases that contained pedigrees of Thoroughbred horses and other data attorneys for TJCIS claim were licensed to Thoroughbred Times and cannot be sold without written approval of TJCIS, something the division of The Jockey Club has not done.

TJCIS also objects to computer hardware being sold during an on-site auction of assets scheduled for Jan. 26 at the company’s former offices at 2008 Mercer Road, Lexington, Ky. Attorneys for TJCIS believe neither the hard drives and/or memory has been erased and the computers could contain much of the proprietary information TJCIS claims it owns.

In addition, veterinarian Kenneth Marcella of Georgia and California photographer Ron Mesaros have filed objections with the bankruptcy trustee over possible sale of articles and photographs they produced and to which they claim ownership and copyright.

To read more about the Thoroughbred Times bankruptcy and history, click here.

A hearing to address the various objections will be held at 9 a.m. on Jan. 24 in U.S. Bankruptcy Court, 100 East Vine Street, second floor, Lexington, Ky. The online auction is tentatively rescheduled from Jan. 28-Feb. 1.

Following is the objection filed by attorneys for The Jockey Club Information Systems.

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF KENTUCKY LEXINGTON DIVISION


IN RE:

THOROUGHBRED TIMES COMPANY, INC.

DEBTOR              :


CHAPTER 7

CASE NO. 12-52388


OBJECTION TO NOTICE OF INTENT TO SELL

The Jockey Club Information Systems, Inc. (“TJCIS”) hereby objects to the Notice of Intent to Sell [Doc. No. 38] (the “Sale Notice”) filed by Trustee J. James Rogan (the “Trustee”). As set forth in the Sale Notice, Halfhill Auction Group (the “Auctioneer”) intends to sell certain databases contained on a HP ProLiant DL380 designated as Lot # 3 on the Auctioneer’s website (the “Databases”) along with other pieces of computer hardware which, depending upon their contents, may also be relevant to this objection. A true and accurate copy of the description of the Databases (Lot # 3) provided by the Auctioneer’s website (the “Website Description”) is attached hereto as Exhibit A and fully incorporated by reference. According to the Auctioneer, the Databases contain the following information (the “Data”): “horse pedigree/stud fees, sales, client ad list (estimated at 40,000 emails), buyer’s guide purchasers, stallion locations, newsletter email list (estimated at 8,000 emails), people associated with horses.”  See Website Description.

Upon information and belief, some or all of the Data is the property of TJCIS which was licensed to Debtor via that certain Agreement Between The Jockey Club Information Systems, Inc. and Thoroughbred Times Company, Inc. dated as of January 1, 2002, as amended (as amended, the “License Agreement”). A true and accurate copy of the License Agreement, including all amendments thereto, is attached to the TJCIS proof of claim [Claim No. 81] which is fully incorporated by reference.  Pursuant to the License Agreement, the Debtor had a non-exclusive license to access the Data from TJCIS for the limited purposes as set forth in the License Agreement. This Data is comprised virtually all of the data which is licensed by TJCIS to its customers on a world-wide basis and included, but was not limited to, the following pedigree and racing information: progeny of certain stallions; sales prices of progeny sold at auction; and other racing, breeding, pedigree and auction statistics. Pursuant to the terms of the License Agreement, none of the Data provided by TJCIS to the Debtor could be conveyed, assigned, or transferred without the written consent of TJCIS, and TJCIS has provided no such consent.

The Data was made available to the Debtor with its permitted use only as provided in the License Agreement. TJCIS submits that the Debtor never had any ownership interest in the Data but was granted only such rights to the access and use of the Data as authorized under the License Agreement. As a consequence, neither the Trustee nor the Debtor’s estate hold a property interest in the Data or other proprietary information provided under the License Agreement. Section 363(b) and (c) permit a trustee to sell only “property of the estate” outside of debtor’s ordinary course of business. However, the Trustee is not selling “property of the estate” to the extent he is attempting to sell the Data as part of the Databases, and such action is not permitted under the Bankruptcy Code.

Alternatively, there are express restrictions on the transfer of the Data to third parties, and those restrictions prohibit a sale of the Data via the contemplated auction. Any transfer of TJCIS’s proprietary information would necessitate approval by TJCIS, and such approval has not been granted. The Trustee has not provided grounds for approval of a sale despite the clear restrictions contained in the License Agreement.

Additionally, the Trustee intends to sell other computer hardware with storage capabilities. Upon information and belief, none of the other computer hardware has had its hard drives and/or memory erased and the information saved thereon may be readily retrievable. Such hardware might include the Data or other proprietary information owned by TJCIS. Without an opportunity to investigate all storage devices, TJCIS further objects to the sale of any hardware with storage capability without assurance that none of TJCIS’s proprietary information is accessible.

WHEREFORE, for the reasons set forth above, TJCIS respectfully requests an Order from this Court prohibiting the attempted sale and/or auction of the Databases and all other computer hardware with storage capability.

NOTICE

Please take notice that this matter shall come before the Court on January 24, 2013 in the United States Bankruptcy Court, 100 East Vine Street, Second Floor, Lexington, Kentucky at the hour of 9:00 A.M. or as soon after as the parties may be heard.

Respectfully submitted,

George D. Smith

Adam M. Back

STOLL KEENON OGDEN PLLC

300 W. Vine Street, Suite 2100

Lexington, KY  40507-1801

COUNSEL FOR THE JOCKEY CLUB INFORMATION SYSTEMS, INC.

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF KENTUCKY LEXINGTON DIVISION

IN RE:

THOROUGHBRED TIMES COMPANY, INC.

DEBTOR              :

CHAPTER 7

CASE NO. 12-52388

OBJECTION TO NOTICE OF INTENT TO SELL

The Jockey Club Information Systems, Inc. (“TJCIS”) hereby objects to the Notice of Intent to Sell [Doc. No. 38] (the “Sale Notice”) filed by Trustee J. James Rogan (the “Trustee”). As set forth in the Sale Notice, Halfhill Auction Group (the “Auctioneer”) intends to sell certain databases contained on a HP ProLiant DL380 designated as Lot # 3 on the Auctioneer’s website (the “Databases”) along with other pieces of computer hardware which, depending upon their contents, may also be relevant to this objection. A true and accurate copy of the description of the Databases (Lot # 3) provided by the Auctioneer’s website (the “Website Description”) is attached hereto as Exhibit A and fully incorporated by reference. According to the Auctioneer, the Databases contain the following information (the “Data”): “horse pedigree/stud fees, sales, client ad list (estimated at 40,000 emails), buyer’s guide purchasers, stallion locations, newsletter email list (estimated at 8,000 emails), people associated with horses.”  See Website Description.

Upon information and belief, some or all of the Data is the property of TJCIS which was licensed to Debtor via that certain Agreement Between The Jockey Club Information Systems, Inc. and Thoroughbred Times Company, Inc. dated as of January 1, 2002, as amended (as amended, the “License Agreement”). A true and accurate copy of the License Agreement, including all amendments thereto, is attached to the TJCIS proof of claim [Claim No. 81] which is fully incorporated by reference.  Pursuant to the License Agreement, the Debtor had a non-exclusive license to access the Data from TJCIS for the limited purposes as set forth in the License Agreement. This Data is comprised virtually all of the data which is licensed by TJCIS to its customers on a world-wide basis and included, but was not limited to, the following pedigree and racing information: progeny of certain stallions; sales prices of progeny sold at auction; and other racing, breeding, pedigree and auction statistics. Pursuant to the terms of the License Agreement, none of the Data provided by TJCIS to the Debtor could be conveyed, assigned, or transferred without the written consent of TJCIS, and TJCIS has provided no such consent.

The Data was made available to the Debtor with its permitted use only as provided in the License Agreement. TJCIS submits that the Debtor never had any ownership interest in the Data but was granted only such rights to the access and use of the Data as authorized under the License Agreement. As a consequence, neither the Trustee nor the Debtor’s estate hold a property interest in the Data or other proprietary information provided under the License Agreement. Section 363(b) and (c) permit a trustee to sell only “property of the estate” outside of debtor’s ordinary course of business. However, the Trustee is not selling “property of the estate” to the extent he is attempting to sell the Data as part of the Databases, and such action is not permitted under the Bankruptcy Code.

Alternatively, there are express restrictions on the transfer of the Data to third parties, and those restrictions prohibit a sale of the Data via the contemplated auction. Any transfer of TJCIS’s proprietary information would necessitate approval by TJCIS, and such approval has not been granted. The Trustee has not provided grounds for approval of a sale despite the clear restrictions contained in the License Agreement.
Additionally, the Trustee intends to sell other computer hardware with storage capabilities. Upon information and belief, none of the other computer hardware has had its hard drives and/or memory erased and the information saved thereon may be readily retrievable. Such hardware might include the Data or other proprietary information owned by TJCIS. Without an opportunity to investigate all storage devices, TJCIS further objects to the sale of any hardware with storage capability without assurance that none of TJCIS’s proprietary information is accessible.
WHEREFORE, for the reasons set forth above, TJCIS respectfully requests an Order from this Court prohibiting the attempted sale and/or auction of the Databases and all other computer hardware with storage capability.
NOTICE
Please take notice that this matter shall come before the Court on January 24, 2013 in the United States Bankruptcy Court, 100 East Vine Street, Second Floor, Lexington, Kentucky at the hour of 9:00 A.M. or as soon after as the parties may be heard.
Respectfully submitted,
/s/ George D. Smith                            George D. Smith
Adam M. Back
STOLL KEENON OGDEN PLLC
300 W. Vine Street, Suite 2100
Lexington, KY  40507-1801
(859) 231-3000
george.smith@skofirm.com
adam.back@skofirm.com
 
COUNSEL FOR THE JOCKEY CLUB INFORMATION SYSTEMS, INC.

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  • Francis Bush

    Looks like we can’t finish any satisfaction to owners at any level. Why wasn’t this info let before notice of auction to sell? No group will be happy with the outcome of this case of poor judgment on all parties. Reminds me of relatives who have been denied access to their inheritance. Squabbling among the parties will end in shameless lawsuits that will benefit no one except attorneys who will need all they can get from the dissatisfied parties.

  • Princessspiro

    If there is a a Licence agreement between the TJCIS and the Thoroughbred Times which prohibits any transfer, or conveyance of the Data included in the agreement with out written consent of the grantor then you cannot “sell” these assets. The complaint makes a clear argument that The Times did not own the data, because it did not generate the data, the TJCIS owned it and as such they should have control of any transfer of this information. The reality is this valuable asset should not be an asset of The Times to be used to offset their debt unless the TJCIS is willing to execute a new agreement with any potential buyer of the entire company. But if no buyer, then the data would not be available for any payment of debt. I would be curious to know what the trustee would argue to the contrary. I am not an expert in the area of intellectual property or bankruptcy so this is just my opinion.  

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