It is common for a purchaser of a business to want to use the trade name and trademark long associated with the business so as to capture its goodwill and reputation. A seller that does not want to part with the trademark often grants the buyer a long-term license to use the seller's trademark. From the licensee's standpoint, the right to use the trademark under a licensing agreement can be among the most valuable assets purchased in the transaction. It is also common for the owner of a trademark to grant several entities exclusive or nonexclusive licenses to use the trademark in certain geographic areas or on certain products, unrelated to any sale of other assets, while retaining ownership of the trademark. In all of these scenarios, licensees often invest capital and build their businesses based on an expectation of uninterrupted use of the trademark.
When a company seeks protection under Chapter 11 of the Bankruptcy Code, the debtor in possession or trustee is granted extraordinary powers not available to companies outside of bankruptcy. One of those powers is the right to assume or reject executory contracts under § 365(a) of the Bankruptcy Code.