Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Bankruptcy Impact on Trademarks, Distribution Rights

By Shmuel Vasser and Yehuda Goor
April 01, 2018

It's not uncommon for rights licensees in the entertainment industry to find themselves in a rights dispute when a licensor files for bankruptcy. Section 365(a) of the Bankruptcy Code allows a Chapter 11 debtor, subject to court approval, to assume or reject any executory contract. While a rejected contract leaves the non-debtor party with a pre-petition damages claim for breach of contract under §365(g), it does not allow it to compel the debtor to continue performing. However, under §365(n), if the contract at issue is one “under which the debtor is a licensor of a right to intellectual property,” the licensee may elect to “retain its rights … to such intellectual property,” thereby preserving its ability to continue using the licensed IP.

This IP exception was Congress's reaction to a decision by the U.S. Court of Appeals for the Fourth Circuit in which the court held that the term “executory contract” encompassed IP licenses and that, under §365(g), the effect of rejection was to terminate an IP license altogether. See, Lubrizol Enterprises v. Richmond Metal Finishers, 756 F.2d 1043 (4th Cir. 1985).

In conjunction with the enactment of §365(n)'s IP exception, Congress also amended §101(35A) to define intellectual property to include, among other things, trade secrets, designs, patent applications and protected works of authorship. Trademarks were purposefully left out, in order “to allow the development of equitable treatment of this situation by bankruptcy courts.” See, S. Rep. 100-505, 5.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.