Supreme Court to Address Trademark Licensee Rights on Rejection of License Agreement During Bankruptcy Proceedings
The Supreme Court of the United States granted Mission Product Holdings’ petition for certiorari to determine whether a debtor-licensor can terminate the rights of trademark licensees by rejecting its trademark licensing agreements as part of its bankruptcy case. Mission Product Holdings, Inc. v. Tempnology LLC, Case No. 17-1657 (Supr. Ct. Oct. 26, 2018). The specific question presented is:
Whether, under § 365 of the Bankruptcy Code, a debtor-licensor’s “rejection” of a license agreement—which “constitutes a breach of such contract,” 11 USC § 365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable non-bankruptcy law.
US bankruptcy law gives a debtor the right to reject executory contracts to eliminate burdensome obligations. The bankruptcy law contains an exemption for licensing deals involving intellectual property, which the relevant provision defines as trade secret, patents, patent applications, plants and copyrights. Notably missing from the definition of intellectual property is trademarks. The issue is whether a debtor-licensor should be forced to continue to monitor and exercise control over how its trademark is being used by licensees, as the US Court of Appeals for the Seventh Circuit found in a 2012 case, or whether the debtor-licensor can terminate the license, as the US Court of Appeals for the First Circuit held in the underlying case (IP Update, Vol. 21, No. 2). The Supreme Court was asked to resolve this circuit split.