The Eighth Circuit recently issued an opinion in the Interstate Bakeries Corporation bankruptcy case reversing its previous holding that a perpetual royalty-free trademark license constituted an executory contract that could be assumed or rejected in bankruptcy.1 The Eighth Circuit, in a r
In Lewis Brothers Bakeries, Inc. and Chicago Baking Co. v. Interstate Brands Corp. (2014 WL 2535294 (8th Cir. June 6, 2014)), the United States Court of Appeals for the Eighth Circuit, sitting en banc, held that a perpetual, royalty-free, assignable, transferable, exclusive trademark license granted in connection with a substantially consummated asset purchase agreement was not an executory contract that could be assumed or rejected by the licensor-debtor in bankruptcy.
The equitable theory of veil piercing, intended to serve as a rectifying mechanism against certain fraud, dishonesty or wrongdoing, is of particular import in the bankruptcy context given that it is an attractive remedy for a creditor of an insolvent company hoping to obtain a greater recovery on its claim. State law governs veil piercing claims and sets forth the hurdles a party must overcome in order to persuade the bankruptcy court that the debtor’s corporate formalities should be ignored.
In 1988, Congress added section 365(n) to the Bankruptcy Code to provide special protections for licensees of intellectual property upon a debtor’s rejection of an intellectual property license agreement. Whether trademarks are within the ambit of section 365(n) protection, though, is open to question.
On June 6, 2014, in Lewis Brothers Bakeries Incorporated and Chicago Baking Company v.
Trademark Licenses At Risk. I have written a number of times on the blog about the impact of bankruptcy on trademark licenses, with a special focus on the risk that trademark licensees face if their licensors file bankruptcy.
In December 2013 I wrote about the Innovation Act, H.R. 3309, a bill focused on patent infringement litigation and other patent law reforms that passed the House of Representatives on a bipartisan basis.
Four decades ago, when I began my legal career, bankruptcy sales were held in low regard. They were regarded, and often referred to, as “fire sales” that were almost certain to attract no interested parties other than bottom feeding liquidators seeking to pay only a fraction of the value of the marketed assets. For this reason, potential sellers steered clear of bankruptcy.
Supreme Court Rules on Importing And Selling Foreign Made Goods
Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)
CASE SNAPSHOT
In a matter of first impression in the Seventh Circuit, the court held that a chapter 7 trustee’s rejection of an executory contract did not terminate the trademark license contained therein.
FACTUAL BACKGROUND