As this article goes to press, an en banc panel of the U.S. Court of Appeals for the Eighth Circuit is scheduled to rehear arguments in In re Interstate Bakeries, relating to the rights of trademark licensees in the event of a licensor's bankruptcy.1 The original panel of circuit judges determined that a perpetual, royalty-free, exclusive trademark license granted as part of a larger asset sale was subject to rejection as an executory contract pursuant to §365 of the Bankruptcy Code. However, that decision seemingly conflicts with other recent circuit court decisions allowing trademark licensees the continued use of licensed trademarks notwithstanding efforts by debtors to reject the licenses.
If the Eighth Circuit decides to proceed with the hearing en banc and the en banc panel reaches a different conclusion than the original panel that allows the licensee continued use of the license, this outcome could reflect an emerging trend among courts to provide protection to trademark licensees in the event of a licensor bankruptcy. If, on the other hand, the Eighth Circuit decides the appeal is moot and, as requested by Interstate Brands Corporation (Brands), vacates both the lower court decisions, then the Third Circuit's decision in In re Exide Technologies and the Seventh Circuit's decision in Sunbeam Products v. Chicago American Manufacturing, will be the key cases providing guidance to trademark licensees on the expected treatment in bankruptcy of trademark licenses that the debtor seeks to reject. This article examines the law regarding the rights of a trademark licensee in a licensor bankruptcy and provides certain suggestions for licensees to protect their rights in the event of a licensor bankruptcy.
Section 365
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