A Delaware bankruptcy judge said Tuesday that he's willing to approve bid procedures for the sale of RadioShack's intellectual property, including data on millions of customers. But he warned there's no guarantee he will approve the sale itself.
RadioShack, which won court approval last month to sell more than 1,740 of its stores to hedge fund Standard General LP, is now seeking to auction off its intellectual property assets. Those assets include the RadioShack trademark, brand labels such as Realistic, patent applications and -- to the consternation of state consumer protection officials around the country -- information on some 67 million customers.
U.S. Bankruptcy Judge Brendan Shannon said he was willing to approve the bid procedures proposed by RadioShack, but he said that any potential bidder "with an IQ above room temperature," should know that there are serious privacy issues that may preclude court approval of the sale.
"This process will play out over the next several weeks," said Shannon. The judge rejected a request by the Texas attorney general to require separate bid allocations for the customer data -- apart from the other intellectual property -- in case the sale of the customer data is disallowed.
Meanwhile, RadioShack attorney Greg Gordon told Shannon that the Fort Worth, Texas-based electronic retailer has agreed to mediation with concerned state attorneys general regarding sale of customer data. Gordon said the mediation, which will include a consumer privacy ombudsman, will start May 14, after a scheduled May 11 auction but before a May 20 court hearing on whether to approve the sale.
But the Texas attorney general's office, which is leading the regulatory charge against the planned sale and is supported by its counterparts in at least 35 other states, still has questions about what information might be sold.
RadioShack has previously said that it planned to sell customer data that included personally identifiable information on 117 million consumers, prompting objections from government authorities in several states. The company now is seeking to sell 8.5 million customer email addresses and some 67 million complete customer name and address files, along with what it calls "transaction data."
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A consultant hired to assist in the IP sale process testified Tuesday that RadioShack's transaction data could include as many as 200 separate fields, including information on what was purchased, where and when, by whom, and for how much.
Hal Morris, representing the Texas attorney general's office, argued that RadioShack should be required to disclose more information about what is included in its transaction data.
Shannon agreed, but he declined to require RadioShack to identify all 200 fields in the customer database.
"I do believe that additional disclosure is necessary with respect to the phrase `transaction data,"' Shannon said, suggesting that RadioShack could add a few sentences in its summary description to include "the sorts of things that I think the typical person might find interesting."
Meanwhile, attorneys for Verizon Wireless and AT&T argued that RadioShack is prohibited from selling subscriber information or other data on their customers who purchased cell phones or wireless plans at RadioShack stores.
Gordon, the RadioShack attorney, said he believes that certain information could be "scrubbed" from the customer data to satisfy the concerns of the wireless carriers.
RadioShack, which has not turned a profit since 2011, sought bankruptcy protection in February after years of financial struggles.
The company, founded in Boston in 1921, began as a distributor of mail-order ship radios, ham radios and parts. In postwar era, it made a name for itself selling high-fidelity audio components, calculators, early personal computer systems and mobile phones, and the computer industry's first laptop.
