On May 20, 2019, the Supreme Court held that certain obligations under trademark license agreements survive any ongoing Bankruptcy proceeding. Specifically, the Bankruptcy Code does not provide the debtor the ability to revoke the benefit to the licensee under the licensed trademark. This means the licensee can continue to exercise the benefit, such as using the trademark, provided under the license agreement.
The Supreme Court delivered this opinion in Mission Product Holdings, Inc. v. Tempnology, LLC. The Court stated, “we hold that under [11 U.S.C. §] Section 365, a debtor’s rejection of an executory contract in bankruptcy has the same effect as a breach outside bankruptcy.” Following this interpretation, the Court explained, “that construction of [11 U.S.C. §] 365 means that the debtor-licensor’s rejection cannot revoke the trademark license.” In addition to this holding, the Court also held that Mission’s claim to money damages—stemming from Tempnology’s rescission of the license and subsequent prohibition of use of the trademarks by Mission—is still available. These damages were equated to lost profits.
Branding is essential for any entity, so it is important to know the scope of the rights associated with the trademarks used for branding. This opinion provides security to any licensee that the right to the usage of the bargained-for trademarks will withstand any potential bankruptcy by the licensor.
The full opinion can be found here: https://www.supremecourt.gov/opinions/18pdf/17-1657_4f15.pdf
Author: John Beyer