Trademark Licensee’s Rights Survive Rejection of Executory Contract...
01/07/13
By: Kathryn Swimm
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
In a case of first impression, the Seventh Circuit in Sunbeam Products, Inc. v. Chicago American Manufacturing held that a trademark licensee is entitled to the contracted-for rights to that trademark even after a chapter 7 trustee rejects the trademark license as an executory contract.[1] Lakewood Engineering & Manufacturing Co. (the “Licensor”) entered into a contract with Chicago American Manufacturing (the “Licensee”) giving the Licensee the right to sell fans bearing the Licensor’s trademark.[2] It also provided that the Licensee could continue to use the trademark for the period of the contract even if the Licensor breached.[3] Three months later, the Licensor was forced into an involuntary chapter 7 bankruptcy proceeding in which the trustee rejected the licensing agreement as an executory contract.[4] When Sunbeam Products, Inc. (the “Purchaser”) acquired the Licensor’s assets, including the trademark, it demanded that the Licensee cease using the trademark.[5] The Licensee refused, and the Purchaser sought an injunction to prevent the Licensee from producing and selling fans bearing the Licensor’s trademark.[6] The bankruptcy court held for the Licensee on equitable grounds.[7] On a direct appeal, the Seventh Circuit held for the Licensee, but did so on different grounds.[8]
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