Posts Tagged: "U.S. Bankruptcy Code"

As predicted, the U.S. Supreme Court has ruled that a debtor’s rejection of a license agreement in bankruptcy proceedings does not mean the licensee no longer retains rights to the mark. Instead, the Court said that rejection of the contract – and therefore the trademark license – constitutes a breach of the contract/ license, not a revocation. In Mission Product Holdings, Inc. v. Tempnology LLC, the High Court was asked to determine whether a trademark licensor’s rejection of a licensing agreement during bankruptcy proceedings terminates the rights of the licensee which would otherwise survive a licensor’s breach of contract under applicable non-bankruptcy law. In an 8-1 decision, the Court held that the rejection of an executory contract during bankruptcy has the same effect as breach of that contract outside of bankruptcy and thus cannot rescind rights previously granted by the contract. As a result, Tempnology’s rejection in bankruptcy of its agreement to license trademarks to Mission Product Holdings didn’t rescind Mission’s rights to continue using those trademarks.

Mission Product Holdings v. Tempnology was argued last week at the Supreme Court and seeks to solve a circuit split regarding the effects of bankruptcy proceedings on trademark licenses. The case asks the nation’s highest court to determine if the rejection of a license in bankruptcy terminates the licensee’s right to to the trademarks or whether that license rejection only constitutes a breach by the licensor, in which case the licensee can still use the marks. The International Trademark Association (INTA) has dubbed the issue presented as “the most significant unresolved legal issue in trademark licensing.” Following our in-depth guest report on the oral argument, IPWatchdog asked those following the case to provide their take on the import of the case, the oral argument, and potential implications of the justices’ questioning.

On Wednesday, February 20, the U.S. Supreme Court heard oral arguments in Mission Product Holdings, Inc. v. Tempnology, LLC, where the Court was asked to address one of the most important issues at the intersection of trademark law and bankruptcy law: whether a debtor-licensor’s rejection of a trademark license terminates the rights of the licensee to use that trademark. Taking seriously the language of the question presented, and generally acknowledging that 11 U.S.C. § 365(g) provides that rejection constitutes a “breach” of the contract, the justices focused on the remedies for breach outside of bankruptcy law and whether, because trademarks (and quality control issues) are involved, deviation from ordinary, contract law principles is warranted. Both the advocates and the justices returned to whether analogies, including with respect to breaches of apartment and photocopier leases, are apposite. The question of whether the case was moot also received some attention, though it seems unlikely that the case will be dismissed on that ground.