Trademark Licenses and Bankruptcy

December 4, 2012, 4:57 PM

The principle categories of intellectual property under U.S. law include patents, copyrights, trademarks and trade secrets. However, the definition of intellectual property under the Bankruptcy Code is different and includes patented inventions protected under the Patent Act, patent applications, plant varieties, copyrighted works protected under the Copyright Act and trade secrets. Trademarks are specifically excluded from the definition of intellectual property under the Bankruptcy Act. If the debtor is the trademark licensor and the debtor rejects the trademark license in the bankruptcy process, the trademark licensee is not entitled to retain the license or use the mark under Section 365(n) of the Bankruptcy Code. For intellectual property as defined by the Bankruptcy Code, after a debtor licensor rejects an intellectual property license, Section 365(n) allows the licensee to either continue using the intellectual property and retain its rights for the duration of the license agreement or to treat the license agreement as terminated. The intentional omission of trademarks from the definition of intellectual property under the Bankruptcy Code is significant and can create substantial risk for a trademark licensee whose business is structured around the goods or services they offer under the licensed mark. --Nicole J. Harrell