In an 8-1decision issued on May 20, the Supreme Court held that rejection of an executory trademark license agreement in a bankruptcy of the licensor is merely a breach, and not a termination or rescission, of the agreement. The licensee retains whatever rights it would have had upon a breach of the agreement prior to bankruptcy and can continue to use the trademarks pursuant to its contractual rights under applicable law. Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___, No. 17-1657 (May 20, 2019).

Background

Debtor in Possession (“DIP”) financing is essentially new bridge financing that is provided to a corporation as it undergoes insolvency proceedings. The term exists because the corporation maintains possession of its assets during this process as opposed to having a bankruptcy trustee take possession. The concept derived from the United States of America where DIP financing is expressly provided for under c.11 of the Bankruptcy Code and allows a bankrupt corporation to incur new debt for the purposes of carrying on business operations.