Szilagyi Ex Rel. Lakewood Engineering & Manufacturing Co. v. Chicago American Manufacturing, LLC (In Re Lakewood Engineering & Manufacturing Co.)
459 B.R. 306
Bankr. N.D. Ill.2011Background
- CAM and Lakewood entered into a December 17, 2008 Supply Agreement to manufacture 20" Lakewood box fans; CAM invested in plant modifications and Lakewood provided materials, with CAM producing based on Lakewood's forecast Exhibit A.
- Lakewood filed an involuntary bankruptcy on February 19, 2009; the Bankruptcy Court rejected the Supply Agreement about six weeks later, and CAM began liquidating inventory and seeking alternative arrangements.
- SZilagy was appointed as Chapter 7 Trustee and rejected the Supply Agreement on March 27, 2009, asserting the estate could disallow ongoing manufacture for Lakewood.
- CAM asserted a license to use Lakewood's patents and trademarks under the Supply Agreement, and later engaged in barter and third‑party sales of Lakewood‑branded fans.
- Jarden Consumer Solutions intervened and ultimately won the Lakewood assets at auction, while CAM continued to manufacture and sell some Lakewood‑branded products under the license, leading to litigation on the license’s scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Supply Agreement is clear and unambiguous. | Plaintiffs contend the contract unambiguously limits CAM's license. | CAM argues the contract is ambiguous and requires extrinsic evidence. | Ambiguous; extrinsic evidence governs interpretation. |
| Whether the license extends to fans CAM manufactured before execution. | Plaintiffs say pre‑execution fans are not covered. | CAM and witnesses testified they were included. | Yes, license covers pre‑execution fans. |
| Whether the license extends to fans manufactured after Lakewood had no further requirements. | License limited to actual requirements up to forecast. | License extends to forecast and allows production beyond actual needs. | Yes, license extends to forecasted production. |
| Whether Rain Guard fans are covered by the license. | Forecast referred to 20" Box Fans; Rain Guard may be beyond. | Extrinsic evidence shows Rain Guard was intended to be covered. | Yes, Rain Guard fans covered. |
| Whether rejection terminated CAM's IP license under §365(n). | Rejection terminates licenses; CAM loses rights. | License survives rejection; CAM retains rights under §365(n). | CAM retained license rights; rejection did not terminate. |
Key Cases Cited
- Air Safety, Inc. v. Teachers Realty Corp., 185 Ill. 2d 457 (Ill. 1999) (four-corners approach to contract interpretation; extrinsic evidence allowed if ambiguous)
- Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985) (rejection of IP licenses under Lubrizol; later statutes create exceptions)
- In re Storm Technology, Inc., 260 B.R. 152 (Bankr.N.D. Cal. 2001) (treatment of license rights upon rejection; equitable considerations)
- In re Exide Techs., 607 F.3d 957 (3d Cir. 2010) (congressional considerations on trademark license treatment)