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New Considerations for Trademark Licenses in a 363 Sale

November 17, 2014 download PDF

On October 31, 2014, Bankruptcy Judge Kaplan of the District of New Jersey addressed two issues critically important to intellectual property licensees and purchasers: (i) can a trademark licensee use section 365(n) of the Bankruptcy Code to keep licensed marks following a debtor-licensor's rejection of a license agreement?; and (ii) can a "free and clear" sale of intellectual property eliminate any rights retained by a licensee?  In re Crumbs Bake Shop, Inc., et al., 2014 WL 5508177 (Bankr. D.N.J. Oct. 31, 2014).  He concluded that section 365(n) protects trademark licenses, notwithstanding the omission of trademarks from the Bankruptcy Code's definition of protected "intellectual property," and that a "free and clear" sale does not extinguish a licensee's section 365(n) rights, absent clear and knowing consent by the licensee.

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