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Debtors Cannot Assume or Assign Trademark License Without Licensor's Consent

By Michael L. Cook and David M. Hillman

Trademarks serve as symbols of good will and are a valuable asset of the business associated with the mark. Not surprisingly, trademark licenses typically require the licensor's consent for assignments, because licensors want the right to pass on the abilities of new potential licensees. In the event of bankruptcy filing by the licensee, the contractual restriction on assignment is ordinarily unenforceable. See 11 U.S.C. ' 365(f)(1). Bankruptcy Code ' 365(c)(1), however, provides an exception to this general rule: a debtor may not 'assume or assign' any executory contract without consent of the non-debtor if 'applicable law' provides that the non-debtor can refuse to accept performance from a third party.

The district court in Blanks v. N.C.P. Marketing Group, Inc. (In re N.C.P. Marketing Group, Inc.), 2005 WL 3253268 (D. Nev. Nov. 21, 2005) held that a trademark license is 'personal and non-assignable' under applicable trademark law, and cannot be assumed or assigned by the Chapter 11 debtor licensee without the licensor's consent. Affirming the bankruptcy court, the district court said that it was ruling on a matter of 'first impression' in the bankruptcy context. The ruling is consistent, however, with non-bankruptcy trademark law. See, eg, Miller v. Glenn Miller Prods., 318 F. Supp. 2d 923, 938 (C.D. Cal. 2004) (held, non-exclusive trademark licensee cannot sublicense without consent of original licensor); Tap Publ'n, Inc. v. Chinese Yellow Pages (New York) Inc., 925 F. Supp. 212, 218 (S.D.N.Y. 1996) (held, exclusive trademark license was personal to licensee and not assignable without licensor's consent). We review here fundamental principles of trademark law to show why trademark licenses are non-assignable (and, in some circuits, non-assumable) by licensees absent licensor consent.

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