First Circuit Holds That Trademark Licensee Loses Right to Use Trademarks When Debtor-Licensor Rejects License
by | posted in: Trademarks | 0

By Brian S. Hermann, Alan W. Kornberg, and Erica G. Weinberger (Paul, Weiss, Rifkind, Wharton & Garrison LLP).

Last month, the United States Court of Appeals for the First Circuit addressed two questions critically important to trademark licensees:  (1) can a trademark licensee use section 365(n) of the Bankruptcy Code to retain licensed trademarks (and exclusive distribution rights) following a debtor-licensor’s rejection of its license and (2) if not, can a licensee otherwise continue to use the licensed trademarks post-rejection?  In re Tempnology, LLC, 879 F.3d 389 (1st Cir. 2018).  The Court held that section 365(n) does not apply to trademarks (or distribution rights) and, in a split (two-to-one) decision, ruled that a licensee’s right to use licensed trademarks terminates upon rejection of its license.  In so ruling, the Court expressly rejected a contrary decision by the United States Court of Appeals for the Seventh Circuit in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012), establishing a clear circuit split regarding the consequences of trademark license rejection for licensees.  This Memorandum discusses the First Circuit’s decision in Tempnology, as well as the scope of section 365(n) of the Bankruptcy Code and the consequences of rejection more generally.

The First Circuit’s decision in Tempnology may not be the last word on these important trademark license issues.  Given the split in Court of Appeals rulings, the Supreme Court could weigh in, if asked.  If not, it remains to be seen whether other courts will adopt Tempnology or Sunbeam or craft an entirely different rule.

The full article is available here.

Recent Developments in Bankruptcy Law, February 2018
by | posted in: Avoidance, Bankruptcy Administration and Jurisdiction, Trademarks | 0

By Richard Levin (Jenner & Block LLP)

The bankruptcy courts and their appellate courts continue to explore issues of interest to practitioners and academics. This quarterly summary of recent developments in bankruptcy law covers cases reported during the fourth quarter of 2017.

The Eleventh Circuit was particularly noteworthy, holding that an individual debtor may recover attorneys’ fees for litigating a damages claim for a stay violation, including fees on appeal (Mantiply v. Horne) and, perhaps more ominously, that a chapter 13 confirmation order is not binding on a creditor who does not object to confirmation but has filed a stay relief motion and that state forfeiture laws may remove property from the estate while the case is pending (Title Max v. Northington). A rehearing motion has been filed in the latter case.

The First Circuit has diverged from the Seventh Circuit, holding that rejection of a trademark license deprives the licensee of future use of the license. (Tempnology)

The Delaware bankruptcy court reaffirmed what should have been clear that a trustee’s avoiding power and recovery claim is not limited to the amount of creditor claims, because section 550 speaks to benefit of the estate, not of creditors. (Physiotherapy Holdings)

Two bankruptcy courts have clarified the prerequisites for and the scope of third party releases and their jurisdiction to issue them, limiting releases by non-voting creditors and of non-indemnified insiders or professionals (New York: SunEdison) and prohibiting a “purchase” of a release solely by making a contribution to the estate. (Colorado: Midway Gold) 

The full memo, discussing these and other cases, is available here, and the full (900-page) compilation of all prior editions is available here.