Supreme Court Will Not Hear Case of Trademarks Being Used After Asset Sale

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court today declined to hear arguments in a case in which a company that had purchased a debtor's trademarks at an asset sale argued that those trademarks were being infringed upon by a third party that continued selling products under the debtor's name (Sunbeam Products Inc. v. Chicago American Manufacturing LLC, No. 12-431, U.S. Sup.).

Bankruptcy

In 2009, creditors of Lakewood Engineering & Manufacturing Co. (LEM) filed an involuntary bankruptcy against the company in the U.S. Bankruptcy Court for the Northern District of Illinois.

LEM, which made and sold a variety of consumer products, had a business contract with Chicago American Manufacturing (CAM). The contract authorized CAM to use LEM's patents and put its trademarks on completed fans.

Sunbeam Products bought LEM's assets, including its patents and trademarks, at an asset sale; however, Sunbeam did not want an inventory of box fans that bore the LEM trademark and were made under contract with CAM.  Moreover, Sunbeam did not want CAM to sell the fans in competition with Sunbeam's products.

Trademark

Nevertheless, CAM continued to make and sell the fans and Sunbeam filed an adversary proceeding against CAM in the Bankruptcy Court.

The Bankruptcy Court held that the contract in question was ambiguous but said that based on extrinsic evidence, it concluded that CAM was entitled to make and sell as many fans as it had agreed to under its contract with LEM.  Sunbeam appealed to the U.S. District Court for the Northern District of Illinois.

Sunbeam appealed to the Seventh Circuit U.S. Court of Appeals.  A panel of the Seventh Circuit said CAM was permitted to continue using LEM's trademarks on "equitable grounds," but the panel did not decide whether a contract's rejection under 11 U.S. Code Section 365(a) ends the licensee's right to use the trademarks.

Conflict Alleged

Sunbeam filed a petition for a writ of certiorari with the U.S. Supreme Court on Oct. 5, seeking a decision on the question which the Seventh Circuit left unanswered.

Sunbeam had argued that there is an intercircuit conflict regarding whether a licensee retains the ability to use a debtor's trademarks after the corresponding intellectual property license is rejected in a bankruptcy proceeding.

LEM is represented by Scott R. Clar of Crane Heyman Simon Welch & Clar in Chicago.  Sunbeam is represented by Joseph D. Frank of Frank/Gecker in Chicago and Leonard J. Feldman of Stoel Rives in Seattle.  CAM is represented by William John Barrett of Rack Ferrazzano Kirschbaum & Nagel-Berg in Chicago, Richard M. Hoffman of Northbrook, Ill., and David B. Goroff of Foley & Lardner in Chicago.

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