Can a debtor discharge a debt arising out of a deliberate or intentional act that causes injury to you?

The United States Supreme Court in Mission Product Holdings, Inc. v. Tempnology, LLC (No. 17-1657) (May 20, 2019) resolved a deep circuit split and held that a licensees’ rights under trademark licenses survive a debtor-licensor’s rejection in bankruptcy, resolving an ambiguity presented in the intersection of intellectual property law and bankruptcy law that has plagued courts for decades.

Key Notes:

The Supreme Court recently limited the ability of debtors to use contract rejection in bankruptcy to shed unwanted trademark licensees. But the Court acknowledged that the result could change if the trademark licensing agreement had different termination rights. Going forward, parties entering into trademark licensing agreements will need to consider this decision carefully as they negotiate termination rights in the event of a bankruptcy by the licensor.

The U.S. Supreme Court has ruled that bankrupt trademark licensors cannot use federal bankruptcy law to rescind the rights of their trademark licensees to continue use of duly licensed trademarks. The decision settles a long-simmering circuit split on a question that the International Trademark Association has labelled “the most significant unresolved legal issue in trademark licensing.”

Executive Summary

Last week, the Supreme Court (the “Court”) ruled a debtor in bankruptcy cannot use the Bankruptcy Code to cut off a licensee’s rights under a license to use the debtor’s trademarks. This ruling resolves a Circuit split and brings the treatment of trademark licenses from a bankrupt debtor in line with patent and copyright licenses, which are protected statutorily by Bankruptcy Code section 365(n).

With the recent uptick in energy-related bankruptcies expected to continue for the foreseeable future (in one prominent example, industry giant Weatherford has just filed for Chapter 11 protection), oil and gas royalty owners need to be on alert. Because companies in financial distress usually fall behind on royalty payments, royalty owners, usually one of the largest groups of creditors in oil and gas bankruptcies, tend to have a lot at stake. This blog goes over how oil and gas royalty owners can protect their interests in these tough economic times.

Bankruptcy protection under Section 365 does not give brand owners/debtor-licensors the unilateral right to rescind trademark licensing agreements.

On May 20, 2019, an 8-1 majority of the United States Supreme Court held that a bankruptcy debtor’s rejection of a trademark license agreement does not constitute a rescission of the license under the Bankruptcy Code. This resolved a split among federal circuit courts previously addressing the issue. Mission Product Holdings, Inc. v. Tempnology, LLC, No. 17-1657 (May 20, 2019).

The US Supreme Court, in an 8-1 decision authored by Justice Kagan, reversed a decision of the First Circuit and held that the rejection of a trademark license agreement under Bankruptcy Code Section 365 (11 U.S.C. § 365) constitutes a breach of the license agreement that has the same effect as a breach outside bankruptcy. Therefore, the licensor’s rejection of the license agreement does not rescind or terminate the licensee’s rights under the license agreement, including the right to continue using the mark. Mission Product Holdings Inc. v. Tempnology, LLC, Case No.