Trademarks can be useful as debt security for lenders and borrowers alike. The relevant trademark laws create complex issues, however, including the frequently misunderstood concepts of “assignments in gross” and “naked licensing.” Too often, lenders and borrowers fail to take these principles into account when setting up seemingly simple trademark security interests.

The results can be disastrous. As shown in Clorox v. Chemical Bank[FOOTNOTE 1] under the worst circumstances disregard of these principles can lead to destruction of the very trademark in which the security interest is sought. This occurrence harms both the borrower and the lender.

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