In addition, a trademark licensee should
negotiate for a security interest in
the licensed trademark to secure any
damages that would result from the
licensor’s rejection of the license in a
bankruptcy case. Finally, trademark
licensees should put language in
each license that expressly preserves
the right of the licensee to use the
trademark in the event of a breach or
rejection of the license by the licensor.
This language may or may not be
enforced in a subsequent bankruptcy
case, but will help the licensee argue in
favor of allowing use of the trademark
after rejection of the license.
Following these guidelines will assist
turnaround managers in protecting
trademark rights for their clients if a
licensor subsequently files bankruptcy. J
Paul M. Hoffmann (top) is a partner and Nicholas
J. Zluticky is an associate with Stinson Morrison
Hecker LLP. Hoffmann has more than 30 years
of experience in bankruptcy and creditors’ rights
matters, representing debtors, creditors, committees,
trustees, buyers, landlords, franchisors, and other
parties in bankruptcy, workout, and collection matters.
Zluticky represents lenders in all aspects of debtor-creditor relationships. He has represented secured
and unsecured lenders in bankruptcy cases, as well
as Kansas and Missouri foreclosures, collection
actions against borrowers and guarantors, workouts,
participation disputes, and lender liability defense.
Hoffmann and Zluticky worked together on cases
involving debtor clients Hostess Brands, Inc. (f/k/a
Interstate Bakeries Corporation), the TWA Post-Confirmation Estate, and Bistate Bistro Associates, L.P.
1 Courts apply the business judgment rule in
evaluating the debtor’s decision to assume or
reject an executory contract. See NLRB v. Bildisco
and Bildisco, 465 U. S. 513, 523 (1984) (citing In re
Minges, 602 F.2d 38, 42-43 (2d. Cir. 1979)); see
also In re Farmland Indus., Inc., 294 B.R. 903, 913
(Bankr. W.D. Mo. 2003); In re Federated Dep’t
Stores, Inc., 131 B.R. 808, 811 (S.D. Ohio 1991).
2 See, e.g., Lewis Brothers Bakeries v. Interstates
Brands Corp., 690 F.3d 1069 (8th Cir. 2012), In
re HQ Global Holdings, Inc., 290 B.R. 507, 509
(Bankr. D. Del. 2003); Blackstone Potato Chip
Co., Inc. v. Mr. Popper, Inc. (In re Blackstone
Potato Chip Co., Inc.), 109 B.R. 557, 560 (Bankr.
D. R.I. 1990); In re Chipwich, Inc., 54 B.R. 427,
429 (Bankr. S.D.N. Y. 1985); but see EnerSys
Del., Inc. v. Exide Techs., Inc. (In re Exide
Techs., Inc.), 607 F.3d 957 (3d Cir. 2010).
3 The authors represented IBC in this case.
4 At the time this article was submitted
for publication, a petition for rehearing
before the Eighth Circuit was pending.