Trademark licensees that file for bankruptcy protection face uncertainty concerning their ability to continue using trademarks that are crucial to their businesses. Some of this stems from an unsettled issue in the courts as to whether a licensee can assume a trademark license without the licensor’s consent. In In re Trump Entertainment Resorts, Inc., 2015 BL 44152 (Bankr. D. Del. Feb. 20, 2015), a Delaware bankruptcy court reaffirmed that the ongoing controversy surrounding the “actual” versus “hypothetical” test for assumption of a trademark license has not abated.

A debtor's decision to assume or reject an executory contract is typically given deferential treatment by bankruptcy courts under a "business judgment" standard. Certain types of nondebtor parties to such contracts, however, have been afforded special protections. For example, in 1988, Congress added section 365(n) to the Bankruptcy Code, granting some intellectual property licensees the right to continued use of licensed property, notwithstanding a debtor's rejection of the underlying license agreement.

Why has the Financial Support Direction (FSD) been issued?

Independent Trustee Services Ltd (the trustee) was the sole trustee of the Ilford Pension Scheme (the Scheme), which was underfunded when the sponsoring employer went into administration in 2004. There was a proposal that the trustee should buy out certain benefits for members of the Scheme, for whom no Pension Protection Fund (PPF) compensation would be available, before the Scheme entered an assessment period.