An interesting question was recently settled in a Delaware court room. When a company files for bankruptcy, it assigns its property to a third party which will sell that property in service of its debts. It has been an unclear question in many states, including Delaware, if a company can assign a trademark license that it had received from the trademark owner. The court ruled that a company cannot assign its license unless the trademark owner gives approval. This is similar to how most states also deal with patent licenses and copyright licenses. In all three cases, the original owner has the ability to prevent the license from being assigned during bankruptcy.
The Case in Delaware
In Delaware, a company recently filed for bankruptcy. This company had a trademark license pertaining to the trademarks of Donald and Ivanka Trump. When the trademark was being assigned with the other properties of the company, the Trumps went to court. The judge agreed that trademark owners have the right to veto a trademark license getting assigned during bankruptcy.
The judge ruled that the very purpose and economic value of trademarks is that they act like a seal of approval that guarantees a level of quality and service. Trademark owners can only maintain the value of a trademark by making sure that they license it to companies that can meet that level of quality. By allowing the court to assign a trademark license, the owner loses the ability to choose who uses the trademark and this can diminish value of the trademark.
What Does This Mean
If you do not live in Delaware, this might not mean anything to bankruptcy proceedings in your state. However, this has become another important example of how judges are giving power to trademark, copyright, and patent owners during bankruptcy proceedings. This is a nationwide trend, and it is very possible that the same types of rights are being extended to owners in your state as well. You should be aware of this if you are preparing to file for bankruptcy.
If you have trademark licenses and you are filing for bankruptcy, you should be prepared for the court to refuse assignment of the licenses. This may affect your decision to file for bankruptcy. In addition, if you are a trademark owner and one of your licensees is filing for bankruptcy, you should look to protect your rights as the owner. If the court intends to assign your license during the bankruptcy, you should fight this in court, because it appears that legal opinion is turning in your favor.
Get the Help of an Experienced Bankruptcy Attorney
If you are considering filing for bankruptcy, you should immediately speak with an attorney who can explain the process and the costs associated with it. Our attorneys specialize in bankruptcy law and we can help you navigate the process correctly. We have many years of experience helping people who are trying to find relief for debt, and we can help you too. Give us a call or schedule an appointment with us today.
