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“Crumbs” of Hope for Trademark Licensees

You are a trademark licensee, and your licensor suddenly declares bankruptcy. Then, to make matters worse, the bankruptcy trustee rejects your licensing agreement. What does this mean for you? Although intellectual property rights are protected under Section 365(n) of the Bankruptcy Code, trademarks are not covered under this provision, calling into question the trademark licensee’s right to continue to use the mark where the licensor has gone into bankruptcy and the license has been rejected by the bankruptcy trustee. However, a recent New Jersey bankruptcy court decision suggests that trademark licensees may avail themselves of the protections of Section 365(n) after all. In the case of In re Crumbs Bake Shop Inc., Case No. 14-24287 (Bankr. D. N.J. Oct. 31, 2014) (ECF No. 288), the court did what Congress failed to do, finding that trademark licensees are entitled to protection under Section 365(n) of the Bankruptcy Code, and allowing licensees to continue to use their intellectual property following the rejection of their licensing agreements by a bankruptcy trustee.