Trademark License Agreement Termination

The Court`s decision leaves unanswered the potential problem, such as the refusal of a trademark licence agreement by a debtor`s licensee, which relieves it of the obligation to exercise quality control or control the infringement market, results in a bare licence that undermines the value of the mark. For example, without any special conditions or circumstances, a licensee simply denying a license to a lower quality licensee no longer prevents the continued use of the trademark granted by the rejected licensee, to the detriment of all other licensees. Look for a new trademark/bankruptcy right that evolves around this decision, especially with respect to franchises. Will the courts conclude that the debtor`s licensee still maintains some degree of quality control, even if it is not bound by a contract or by law? Will licensees and licensees begin to include specific conditions in their licensing agreements to avoid unintended consequences if a licensee is at risk of bankruptcy? In the meantime, debtor licensees should carefully consider whether the denial of a trademark license is likely to reduce one of its most valuable assets, since preserving or increasing the value of their trademark is generally a motivation for a debtor licence refusal that refuses a trademark license (in the hope of making a better deal). Also, ensure that trademark holders ask Congress to amend the bankruptcy code to compensate for the rights of licensees and licensees and avoid the risk of undermining the value of their trademarks. In cross-referencing the reasons given by the seventh circle, Kagan J. wrote for a majority 8-1 (Gorsuch J. challenged on procedural grounds, Sotomayer J.A. agrees) that the refusal of a contract of execution by a debtor (including, but not limited to a trademark license) is considered a violation outside of bankruptcy and does not withdraw the continuing rights previously granted.

With respect to the concern that a licensee`s obligation to monitor and quality control would require the debtor to devote resources to quality control or trademark disability, the court found that Congress had struck a balance between several competing interests in the development of the code and that it did not intend to authorize “everything and everything” to expedite restructuring.