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Supreme Court Rules Rejection of Trademark License Does Not Rescind Rights of Licensee
In Mission Product Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652 (2019), the Supreme Court undertakes to resolve a circuit split between the First and Seventh Circuits over the effect of rejection in bankruptcy of a trademark license under section 365 of the Bankruptcy Code. The question is whether a debtor's rejection of its agreement granting a license "terminates rights of the licensee that would survive the licensor's breach under applicable nonbankruptcy law." (Pet. for Cert. i.) Those rights include the right to continue to use the trademarks for the term of the rejected agreement.
Refusing to treat a trademark license agreement any differently from any other executory contract, the Court applies general executory contract principles to resolve the question. It broadly concludes "rejection breaches a contract but does not rescind it. And that means all the rights that would ordinarily survive a contract breach, including those conveyed here, remain in place." Id. at 1657. Accordingly, the Court holds rejection does not rescind rights the contract previously granted and so cannot revoke the trademark license granted the nondebtor licensee. Id. at 1666.
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