Monrovia Nursery Company filed with the U.S. Bankruptcy Court an objection to Color Spot Nurseries’ (a) Sale Motion (Docket No. 64) and (b) notice of possible assumption and assignment of executory contracts and unexpired leases (Docket No. 141). Monrovia Nursery Company’s objection asserts, “Monrovia is a party to that certain License Agreement with Debtor Color Spot Holdings, dated September 1, 2015 (‘License Agreement’) in which Monrovia granted Color Spot a non-exclusive and non-transferable license (‘License’) to market and sell certain finished plants utilizing the Monrovia® trademark and to utilize Monrovia’s methods and systems for marketing, selling and distributing the Monrovia plants in exchange for a royalty payment…. Federal trademark law provides that ‘a licensor who grants a non-exclusive license for the use of its trademark is entitled to certain protections, including restrictions on assignment.’…. The Delaware Bankruptcy Court has recognized that the ‘substantial weight of authority holds that under federal trademark law, trademark licenses are not assignable in the absence of some express authorization from the licensor, such as a clause in the license agreement itself.’….In other words, federal trademark law generally bans assignment of trademark licenses absent the licensor’s consent because, in order to ensure that all products bearing its trademark are of uniform quality, the identity of the licensee is crucially important to the licensor. Monrovia objects to the proposed assumption and assignment of the License Agreement because it is not assignable under federal trademark law and other applicable law. Under the terms of the License Agreement, the License grants Color Spot a non-exclusive and non-transferable license to market and sell certain finished plants utilizing the Monrovia® trademark and brand exclusively for retail sale to Lowe’s…. Monrovia objects to the sale of all inventory or other product with or bearing the Monrovia® trademark, including but not limited to branded containers, tags, info labels, stakes and labeling and/or marketing materials, to general purchasers free and clear of the restrictions in the License Agreement because such a sale of the Monrovia branded product does not comply with the requirements for a sale under the Bankruptcy Code and violates the License Agreement…. Moreover, Monrovia does not and cannot consent to the sale of its product to general buyers as provided under Section 363(f)(2) of the Bankruptcy Code because of potential harm and potential loss of its trademark under the Lanham Act (15 U.S.C. section 1051 et seq.)….Finally, Monrovia is the registered owner and holds the right to license the trademark Monrovia® and no bona fide dispute exists as to its interest in the trademark…. Any sale of inventory or product branded with the Monrovia® trademark would violate the License Agreement and applicable non-bankruptcy law. Accordingly, the Motion should be denied and the Debtors prohibited from selling such inventory and product to provide adequate protection to Monrovia and its rights in the Monrovia® trademark pursuant to Section 363(e) of the Bankruptcy Code.”
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