May 15, 2007
The Descent Into Darkness Continues
I've always viewed as misguided those attempts to apply to trademarks the "federal common law" rule that patent licenses (and to some extent copyright licenses) are not assignable absent the licensor's consent. In 2002, a somewhat confused Georgia bankruptcy court held that trademark licenses were personal to the licensor and not-assignable under the Lanham Act. In re Travelot Co., 286 B.R. 447, 455 (Bankr. D. Ga. 2002). Fortunately for the licensee in that case, the Travelot court also, incorrectly, failed to recognize the contract in question as containing a trademark license.
At least that court reached the correct result, if for the wrong reasons.
In In re Wellington Vision, Inc., 2007 WL 762398 (S.D. Fla. 2007), the District Court affirmed a bankruptcy court decision denying a debtor the right to assume a franchise agreement. The franchise agreement included, as do all franchise agreements, a license to use the franchisor's trademarks. The Court relied on the dicta in Travelot (and only Travelot - no other support was cited to) in holding that a non-exclusive trademark license is personal to the licensor and cannot be assigned without the licensor's consent. Unfortunately, Travelot itself was not based on much more. The dicta in Travelot was based solely on one other trademark case, Tap Publ'ns, Inc. v. Chinese Yellow Pages (New York), Inc., 925 F.Supp. 212, 218 (S.D.N.Y. 1996), which itself appears to be based on a misreading of a well respected treatise on trademark law. In the end, this line of decisions is based on a misunderstanding of the purpose and application of trademark law.
The possible effect of cases like Wellington and Travelot is fairly serious. If more courts start to hold that trademark licenses are non-assignable in bankruptcy, and couple that concept with the "hypothetical test" for applying section 365(c)(1)(A), we will have a situation where no debtor can retain the benefit of a trademark license without the licensor's consent. Its bad enough we have that situation with respect to patent and copyright licenses.
At least that court reached the correct result, if for the wrong reasons.
In In re Wellington Vision, Inc., 2007 WL 762398 (S.D. Fla. 2007), the District Court affirmed a bankruptcy court decision denying a debtor the right to assume a franchise agreement. The franchise agreement included, as do all franchise agreements, a license to use the franchisor's trademarks. The Court relied on the dicta in Travelot (and only Travelot - no other support was cited to) in holding that a non-exclusive trademark license is personal to the licensor and cannot be assigned without the licensor's consent. Unfortunately, Travelot itself was not based on much more. The dicta in Travelot was based solely on one other trademark case, Tap Publ'ns, Inc. v. Chinese Yellow Pages (New York), Inc., 925 F.Supp. 212, 218 (S.D.N.Y. 1996), which itself appears to be based on a misreading of a well respected treatise on trademark law. In the end, this line of decisions is based on a misunderstanding of the purpose and application of trademark law.
The possible effect of cases like Wellington and Travelot is fairly serious. If more courts start to hold that trademark licenses are non-assignable in bankruptcy, and couple that concept with the "hypothetical test" for applying section 365(c)(1)(A), we will have a situation where no debtor can retain the benefit of a trademark license without the licensor's consent. Its bad enough we have that situation with respect to patent and copyright licenses.
Labels: assignment, assumption, trademark license, trademarks
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