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Supreme Court Decides “The Most Significant Unresolved Legal Issue in Trademark Licensing”

Widerman Malek, P.L.
Melbourne, Florida

Last fall, the United States Supreme Court was to decide the issue of what happens to a trademark license when the brand owner goes bankrupt.

In a decision today, the Supreme Court’s decision seems to be good news for trademark licensees and bad news for trademark licensors.

An 8-1 Supreme Court ruled that a bankrupt company’s decision to “reject” an existing contract does not revoke a trademark’s licensee’s right to continue using the trademark. The Court reasoned, “The question is whether the debtor-licensor’s rejection of that contract deprives the licensee of its rights to use the trademark. We hold it does not.” “A rejection breaches a contract but does not rescind it. And that means all the right that would ordinarily survive a contract breach, including those conveyed here, remain in place.”

Thus, under the 1988 amended Bankruptcy Code, the licensee has the option of either treating the license as terminated and pursuing a claim for damages or to continue to abide by the terms of the license agreement and pay all royalties or other payments due thereunder.

The main argument against this holding is that trademark licensors are obligated to maintain the quality and nature of the products or services bearing the licensor’s trademarks. If the licensor is bankrupt, who would undertake this obligation? Stay tuned.

For more information about any of your trademark or intellectual property questions, please contact Mark Warzecha at 321-255-2332 or

Mark focuses his practice exclusively in the areas of Intellectual Property prosecution and litigation. He advises corporations and individuals on their foreign and domestic intellectual property needs. Mark counsels his clients on every aspect of intellectual property protection, policing and enforcement. He manages numerous trademark portfolios both domestic and foreign, including Germany, Japan and South America.

Mark also advises his clients in matters related to Intellectual Property purchases, licensing and developing a strong, revenue generating, Intellectual Property portfolio. He is also a Florida Supreme Court Certified Civil Mediator specializing in Intellectual Property disputes.

The general information contained herein is intended for informational purposes only. It is not intended to be, and should not be construed as, legal advice or legal opinion on any specific facts or circumstances.

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