A Big Answer To A Big Question. After dividing the courts for a number of years, we finally have the answer to the big question of whether rejection of a trademark license by a debtor-licensor deprives the licensee of the right to use the trademark. Here’s the question on which the Supreme Court granted certiorari in the Mission Product Holdings, Inc. v Tempnology, LLC case:

On May 20, 2019, the U.S. Supreme ruled a trademark licensee can continue to use the trademark after a bankrupt licensor rejects the license agreement. The case is Mission Product Holdings, Inc. v. Tempnology, LLC. Some lower courts had ruled that rejection of trademark license agreement terminated the licensee’s rights to use the trademark.

Yesterday the U.S. Supreme Court ruled that bankrupt trademark licensors cannot unilaterally rescind trademark license rights previously granted, resolving a longstanding split among the circuits and providing much needed certainty to intellectual property (IP) licensors and licensees. In fact, the International Trademark Association had dubbed this "the most significant unresolved legal issue in trademark licensing."

Prior to Monday, May 20, 2019, the rights of a trademark licensee to continue to use the mark after the licensor “rejected” the license in bankruptcy remained an unresolved legal issue with licensees left scrambling. If the Chapter 11 Debtor “rejects” the license contract, then must the licensee immediately stop all sales of products bearing the mark and “get in line” with other unsecured creditors for its damages? Or, can they continue to sell products bearing the mark when the trademark owner expressed to desire to monitor the proper and effective use?

Yesterday, in Mission Product Holdings v. Tempnology LLC, the Supreme Court held that a trademark licensee may continue using a licensed trademark after its licensor files for bankruptcy and rejects the relevant license agreement. While a debtor-licensor may "reject" a trademark license agreement under Section 365 of the Bankruptcy Code, such rejection is only a breach of the agreement and does not allow the licensor to revoke the licensee's rights.

On Monday, the U.S. Supreme Court finally resolved a trademark law issue that had remained unsettled for years: whether a bankrupt trademark owner may revoke a trademark licensee’s rights to a licensed trademark by “rejecting” the license agreement under a specific provision of the Bankruptcy Code. The Court, in an 8-1 decision, held that the Code provided a bankrupt trademark owner with no such right, and thus a trademark licensee maintains its right to continue using the trademark per the terms of the license.

Mission Product Holdings, Inc. v. Tempnology, LLC, No. 17-1657

Today, the Supreme Court held in an 8-1 decision that when a debtor, acting under Section 365 of the Bankruptcy Code, rejects a contract licensing its trademarks, the contract is not rescinded and the debtor thus cannot revoke the trademark license.

Chapter 11 Debtor, Tempnology, LLC (“Tempnology”) is feeling the heat today, May 20, 2019, as the United States Supreme Court held that Mission Product Holdings, Inc., (“Mission”), a licensee of Tempnology’s “Coolcore” products, can continue to use Tempnology’s trademarks to sell and distribute its products in the United States. The Supreme Court’s decision resolved a significant circuit split, at least for trademark licensing agreements, as to whether Section 365 of the Bankruptcy Code can shield a debtor-licensor from its licensees continued use of licensed trademarks.

In 8-1 decision resolving circuit court split, U.S. Supreme Court holds that bankrupt company’s rejection of executory contract containing trademark license constitutes breach of contract, not its rescission or termination, and licensee retains its rights under the license.

The US Supreme Court decided what the International Trademark Association (INTA) called "the most significant unresolved legal issue in trademark licensing" when it ruled on May 20, 2019, that bankrupt companies cannot use bankruptcy law to revoke a trademark license.

In its 8-1 decision, the court resolved a circuit split by holding that a debtor's rejection of a trademark license under Section 365 of the Bankruptcy Code, which enables a debtor to "reject any executory contract" (a contract that neither party has finished performing), amounts only to a breach of the license.