Seventh Circuit Upholds Use of Trademark by Licensee Following Rejection of Trademark License under Section 365 of the Bankruptcy Code

In a decision issued on July 9, 2012, Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, No. 11-3920, 2012 U.S. App. LEXIS 13883 (7th Cir. July 9, 2012), the United States Court of Appeals for the Seventh Circuit held that a trademark licensee retained the right to use licensed trademarks following the rejection of the license by a debtor licensor under section 365 of the Bankruptcy Code. Section 365(n) of the Bankruptcy Code protects the rights of licensees under rejected patent, trade secret and copyright licenses, but the rights of licensees under rejected trademark licenses are often unclear following rejection. The Sunbeam decision clarifies that, in the Seventh Circuit, licensees under rejected trademark licenses retain their rights under the license following rejection of the license by a debtor licensor. The attached memorandum summarizes and discusses potential implications of this decision.