Intellectual property licensors are perpetually concerned about whether their licensees can use the bankruptcy process to assign their license rights to third parties, especially to third parties to whom the licensor would not want to grant a license, or at least not on the existing license terms. This concern can be particularly acute for trademark licensors, who want to protect their trademarks against undesired uses and keep the trademark license rights “personal” to their licensees.
The U.S. Court of Appeals for the Seventh Circuit recently provided some comfort for trademark licensors when it concluded in In re XMH Corp., 647 F.3d 690 (7th Cir. 2011), that a licensee under a non-exclusive trademark license cannot assign its license in bankruptcy under §365 of the Bankruptcy Code without consent from the licensor. While the Seventh Circuit’s pronouncements with respect to the assignability of the license were ultimately dicta, this case is noteworthy for several reasons.
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