Can A Receiver Be Appointed To Sell Intellectual Property To Satisfy A Judgment?

QUESTION: Can a receiver be appointed to sell intellectual property to satisfy a judgment?

ANSWER: Yes. A receiver in aid of execution is an excellent way of liquidating intellectual property assets to satisfy a judgment. Because these types of intellectual property assets are intangibles, a writ of execution cannot be used. It is important, however, to do it the correct way so that a buyer will be able to prove the chain of title needed in any later infringement action. A method approved in California is to obtain an order compelling the judgment debtor to assign the copyright, patent, or other intellectual property to a receiver who can then manage or sell it. Peterson v. Sheriff of S. F., 115 Cal. 211 (1896). This can be done by obtaining an order for the judgment debtor to appear at a judgment debtor’s examination and, at the conclusion of the examination, obtain an order under Cal. Civ. Proc. §708.205 (a) compelling the judgment debtor to assign the intellectual property to the receiver. If the judgment debtor refuses, the court can hold him or her in contempt or can order the clerk or even the receiver to execute the assignment. See Finnegan v. Finngan, 64 Cal. App. 2d 109 (1944); Zanetti v. Zanetti, 77 Cal. App. 2d 553 (1947).

In a recent case, the Ninth Circuit affirmed the appointment of a receiver to sell the music copyrights owned by musician and band leader George Clinton. Hendricks v. Clinton, 2014 WL 2808138 (9th Cir.). Clinton had been sued by his former lawyers to collect their fees. They obtained a $1.7 million judgment. Unable to collect the full amount of the judgment, the lawyers filed an action seeking an order for Clinton’s judgment debtor examination and a separate action for the appointment of a receiver and ordering the assignment of Clinton’s copyrights to certain master recordings to the receiver. The district court granted the motions and Clinton appealed. The Ninth Circuit affirmed, upholding the appointment of the receiver to manage the copyrights and, ultimately, to sell them to satisfy the judgment.