Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC

A trustee’s rejection of a contract does not abrogate a trademark license.

Opinion (Easterbrook): Lakewood Engineering & Manufacturing Co. (Lakewood) licensed Chicago American Manufacturing (CAM) to practice Lakewood’s patents and put Lakewood’s trademarks on the fans that CAM built. Lakewood would take orders from customers, and CAM would ship the completed fans to the customers on Lakewood’s instructions. Lakewood authorized CAM to sell the fans themselves if Lakewood did not purchase them. Three months into the contract Lakewood filed for bankruptcy. Sunbeam Products, as Jarden Consumer Products (Jarden), bought Lakewood’s assets, including the patents and trademarks. Sunbeam did not want the fans that CAM had built nor did they want CAM to sell the fans in competition. Lakewood’s trustee rejected the executory part of the contract with CAM. Jarden argued that CAM had to then stop building and selling fans with Lakewood’s trademark. Under certain conditions, § 365(n) of the Bankruptcy Code (the Code) allows licensees to continue using intellectual property after the contract has been rejected, but the Code omits trademarks from its definition of intellectual property. Sometimes “an omission is just an omission.” The Court held that § 365(n) classifies rejection in bankruptcy as a breach and as such does not abrogate the other party’s rights. The Court of Appeals AFFIRMED the district court’s ruling that CAM was entitled to make as many fans as Lakewood had estimated it would need for 2009 and to sell them.