Why your trade mark licence may survive bankruptcy
Jim Leshaw and Ari Newman explain how a recent case has created uncertainty around the fate of trade mark licence agreements after being rejected in bankruptcy proceedings
Section 365 of the US Bankruptcy Code empowers a trustee or debtor in
possession to reject so-called executory contracts that are burdensome
to the bankrupt estate. Courts usually define an executory contract as
one where material performance remains on both sides of a licence
agreement; such a contract may be rejected in bankruptcy. Under section
365(g) of the code, the rejection of an executory contract constitutes a
breach of such a contract immediately before the date of the filing of
the bankruptcy petition. Section 365(n) details the effect of rejection
of "an executory contract under which the debtor is a licensor of a
right to intellectual property", but the term intellectual property is
defined narrowly to include trade secrets, patents and copyrights, and
not trade marks, trade names and service marks. Congress's failure to
include trade marks, trade names and service marks in this definition
has left courts without clear...
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