In February, the United States Supreme Court heard oral arguments in the case of Mission Product Holdings Inc v Tempnology, LLC to address an issue at the intersection of intellectual property and bankruptcy law. The issue presented to the Supreme Court is whether, under Section 365 of the Bankruptcy Code, a debtor-licensor’s rejection of a license agreement terminates the licensee’s rights that would survive the licensor’s breach under non-bankruptcy law.
In this case, the debtor, Tempnology, sought to terminate its obligations under a trademark license in addition to rescinding the licensee’s right to use the debtor’s trademark. Section 365(a) gives the debtor a statutory right to reject a contract in bankruptcy and Section 365(g) is clear that this rejection should be treated as a breach of contract. The question really turns on the court evaluating the competing interests of the license parties, including the underlying purposes of rejection under the Bankruptcy Code to free a debtor of costly commitments and the preservation of a licensee’s rights. However the court comes out on this issue, trademark license parties will feel the effects of the decision.
JDSUPRA Blog Article: Fate of Licenses in Bankruptcy
National Law Review Article: Trademarks, Bankruptcy, and Leverage
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