U.S. Bankruptcy Law

U.S. Bankruptcy Law

Flixnet provides a video streaming service focused on classic horror films and romantic comedies.

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It has approximating 1,500 copyright licenses from movie studios that allow it to stream films for

the next five years. Under the terms of the contracts, Flixnet pays the studio fees based on the

number of views of the studio’s films each month.

 

For their part, the studios remain free to license

the copyrights to third parties, but if any of those third parties are video streaming services, the

studios agree to pay 3 percent of any resulting licensing fees to Flixnet as a “competition loss

abatement bonus.”

Facing stiff competition from other video streaming companies and a falling demand for horror

movies from the 1970s, Flixnet files for bankruptcy. Its library of copyright licenses includes 153

films from various studios that Netflux, one of its competitors, has long wished to stream. The

studios have, however, refused to license the films to Netflux directly because of concerns about

being associated with Netflux’s core business, which consists of Albanian porn movies.

In order to continue to operate in Chapter 11, Flixnet proposes that it assume all its copyright

license agreements. In addition, it wishes to assign its rights under 153 of the licenses to Netflux

for a considerable profit. Since the studios negotiated their original license agreements with

Flixnet, the market value of video streaming rights has increased markedly. Accordingly, the

studios object to Flixnet’s efforts to assume the contracts. They hope of renegotiate more favorable

fee arrangements. In addition, they strenuously object to the assignment of any licenses to Netflux.

May Flixnet assume the contracts over the objections of the studios? May it assign the 153 licenses

to Netflux?

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