Over the years, a company’s rights in intellectual property have become increasingly important to its short and long term viability and value. Companies invest substantial capital licensing and developing intellectual property rights, thereby increasing the value of their intellectual property assets. They rely on their right to continued use of such intellectual property assets. Consequently, the disposition of intellectual property licenses in bankruptcy can have a significant impact on both the licensor and licensee.
In In re Exide Technologies , the 3rd U.S. Circuit Court of Appeals recently adjudicated the disposition of a trademark license in bankruptcy in favor of the licensee, but did not resolve the tension between the plain text of the Bankruptcy Code’s treatment of intellectual property and its impact on trademark licenses. Currently, a trademark licensee runs the risk that the licensor will file for bankruptcy and revoke an otherwise valid license after substantial investment or consideration is paid by the licensee.
The Plight of the Trademark Licensee
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