As businesses experience diminishing revenues, falling stock prices, and other economic hardships resulting from Coronavirus Disease 2019 (COVID-19), some economists project the possibility of an unprecedented number of business bankruptcies. Some of these businesses own brands, and some have entered into relationships, most commonly trademark licenses, under which they allow others to use their brands. What happens to a trademark license when a brand owner becomes insolvent, particularly in the context of a reorganization under Chapter 11?

In a highly anticipated decision issued last Thursday (on December 19, 2019), the United States Court of Appeals for the Third Circuit held in In re Millennium Lab Holdings II, LLC that a bankruptcy court may constitutionally confirm a chapter 11 plan of reorganization that contains nonconsensual third-party releases. The court considered whether, pursuant to the United States Supreme Court’s decision in Stern v. Marshall, 564 U.S. 462 (2011), Article III of the United States Constitution prohibits a bankruptcy court from granting such releases.