All IP Is Not Created Equal

Originally published in Trademark World, June 5, 2007

Most trademark attorneys may never encounter a bankruptcy case as part of their practice, but all trademark attorneys should be aware of Bankruptcy Code section 365(a) and the potential risks it may generate for their clients who license trademarks. Under section 365(a), a trademark licensor who declares bankruptcy and files for Chapter 11 may be permitted to reject—that is, to breach—a trademark license agreement where rejection could benefit the estate. Although bankruptcy law protects other intellectual property license agreements against rejection (e.g., licenses for patents and trade secrets), Congress purposely rejected extending a similar safeguard to trademark licensees, leaving them uniquely vulnerable to the loss of all or part of their business if the company licensing them a trademark declares bankruptcy.