The recent decision of the U.S. Court of Appeals for the Seventh Circuit in Sunbeam Products v. Chicago American Manufacturing, 2012 U.S. App. LEXIS 13883 (7th Cir. filed July 9, 2012), has engendered much attention by holding that a licensee of a rejected trademark license can continue to use the licensed intellectual property. This marks a divergence from the Fourth Circuit’s holding in Lubrizol Enterprises v. Richmond Metal Finishers, 756 F.2d 1043, 1048 (4th Cir. 1985), that rejection of a license agreement by a licensor terminated the licensee’s rights to continue to use intellectual property.

The Lubrizol decision sent shock waves throughout the business community, raising concerns that innovation would be stifled, creating a chilling effect on business development because of the newfound uncertainty surrounding the effects of a bankruptcy on the continued use of licensed technology. This issue was so serious that Congress amended the Bankruptcy Code in 1988 by enacting §365(n) to protect licensees of rejected patent, copyright, and trade secret licenses from Lubrizol‘s effects. In essence, §365(n) explicitly permits a licensee to elect to continue to use licensed intellectual property for the term of the license, notwithstanding rejection, conditioned on, among other things, continued payment of royalties. In enacting §365(n), Congress included a limited definition of intellectual property to the Bankruptcy Code that did not include trademarks.1 This left open the question of how to treat the rejection of a trademark license.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]