November 02, 2018

Managing Intellectual Property quotes Marci Ballard on how the Supreme Court may clarify the bankruptcy effect on trademark licensing

2 min

On November 2, 2018, Marci Ballard was quoted in Managing Intellectual Property on the Supreme Court granting certiorari in Mission Product Holdings v. Tempnology, leaving the Court to address a circuit split on trademark licensees' right to use a mark when bankrupt licensors reject the license under the bankruptcy statute in what the International Trademark Association notes as "the most significant unresolved legal issue in trademark licensing" in its amicus brief in support of the petition MPH.

A group of law professors submitted an amicus brief supporting MPH, the petitioner, and the Seventh Circuit's Sunbeam rule, stating that the First Circuit's decision "creates a novel, bankruptcy specific form of 'statutory breach' that terminates the trademark issues – immediately transforming an innocent licensee into an infringer.... If left uncorrected, [it] will allow debtor-licensors to unwind a variety of settled transfers of property rights."

Ms. Ballard pointed out: "The property right is not fully transferred in a license, it is loaned under certain terms; it is not an 'assignment' which would be a 'settled' property right. The licensor retains certain property rights (to sue for damages for infringement, for example) in a license that the licensee would not have."

Ballard has clients who are licensors, licensees, and even both. She says she is "happy the Supreme Court picked it up," because what parties on both sides want "is clarity." On one hand, licensees want security in the terms of their licenses because they require significant investments of time and resources. "Maybe with start-ups," Ballard explains, "I can imagine you'd have a concern that a licensor is not going to be an ongoing entity, and that goes into the initial valuation of the license."

Ballard explains: "You're trying to dovetail two federal statutes – the Bankruptcy Code and the Lanham Act – and a circuit split on top of that." The purpose of the bankruptcy statute is to relieve debtors of undue burdens and to assist creditors in collecting debts, while the purpose of the trademark statute is to ensure marks serve as source identifiers.