Last spring I excerpted from and linked to an article by my friends Richard Bergovoy (of the Licensing Law Blog) and Oliver Herzfeld (of Beanstalk) concerning the dizzying concept of a trademark licensee gone bankrupt. Now I’m told that Part II is out and about as well.
Here’s a highlight:
If Licensee Seeks to Assume and the Licensor Objects
The licensor may believe that the licensee or its proposed assignee are incapable of properly performing the license agreement. One of the fundamental principles of U.S. trademark law is that a licensor must control the quality of the goods and services provided by the licensee under the licensed mark. This rule is designed to fulfill the public policy objective of consumer protection, in that trademark laws help prevent the public from being misled as to the quality of branded products and services. A prohibited “assignment in gross of a mark” or other failure to maintain quality control standards could give rise to a so-called “naked license” claim. The consequences of such a claim can be quite severe. In particular, “a court may find that the trademark owner has abandoned the trademark, in which case the owner would be estopped from asserting rights to the trademark.” To prevent such damage from occurring, the licensor may object to a licensee’s assumption or assumption and assigument of a license agreement on the following four grounds …
The four grounds, and the rest of the article, can be found here.