The Crossroads of Trademark Licensing and Bankruptcy Law

Tuesday, May 21, 2019

The U.S. Supreme Court settled a circuit split over how trademark license agreements are treated under Chapter 11 bankruptcy.  The case arose from a non-exclusive license Tempnology, LLC granted to Mission Products Holdings (“Mission”) to use Tempnology’s “Coolcore” trademarks.  Later, Tempnology filed Chapter 11 bankruptcy and sought to rescind the trademark license agreement with Mission.  Tempnology argued that the Bankruptcy Code enabled a debtor (such as Tempnology) to “reject any executory contract” so that it could terminate the trademark license it had granted to Mission.  Mission argued that its licensing rights survived Tempnology’s rejection of the agreement.  In a decision by Justice Kagan to which Justice Gorsuch dissented, the Supreme Court sided with Mission, holding that Tempnology’s rejection of the agreement had the same effect as a contract breach outside of bankruptcy:  it gave Mission a claim for damages while leaving intact Mission’s right to use the trademarks under the agreement.  Mission Prod. Holdings, Inc. v. Tempnology, LLC, --- S.Ct. ---, 2019 WL 2166392 (May 20, 2019).  The decision makes clear that license agreements need to account for the possibility of bankruptcy by the trademark owner.