Client Alert

Trademark Licenses Cannot be Assumed or Assigned in Chapter 11 Bankruptcies

March 28, 2006

Jesse H. Austin, III and Keri Chayavadhanangkur

In a recent case, the United States District Court for the District of Nevada held that a trademark license is "personal and non-assignable" under applicable federal law and cannot be assumed or assigned by a Chapter 11 debtor licensee without the consent of the licensor. As a result of the decision, Chapter 11 may no longer be a viable option for trademark licensees who rely on such licenses to continue operations. In addition, lenders should be aware of the risk of relying on a trademark license as collateral as the value of such collateral could be rendered meaningless in a bankruptcy proceeding.

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