What happens to a trademark licensing agreement when the licensor files for bankruptcy? It is an issue that was just reviewed by the U.S. Supreme Court in the case of Mission Product Holdings v. Tempnology.
The highest court held that filing for bankruptcy does not deprive the licensee of its rights to use the licensed trademark. It ruled as such desptre the Bankruptcy Code’s edict that debtors may reject any contract that neither party has finished performing.
The underlying case involved Tempnology entering into a licensing agreement with Mission Product Holdings in 2012. That contract provided Mission with a non-exclusive license to use certain Coolcore trademarks around the world, including in the United States. However, Tempnology filed for Chapter 11 bankruptcy prior to the expiration date of the agreement.
In coming to its conclusion, the U.S. Supreme Court first determined that a rejection of contract in bankruptcy has the same consequence as a contract breach outside of bankruptcy. The counterparty has a claim for damages, but the counterparty also keeps the rights received under the agreement.
“Rejection of a contract — any contract — in bankruptcy operates not as a recission, but as a breach,” stated the majority opinion.
And so this opinion now serves as an important announcement for those working in the realm of trademark law. A bankruptcy filing does not put an end to a licensed governed by written contract. The licensee can continue to assert its rights beyond the bankruptcy because, while the licensor may have breached the agreement by filing for bankruptcy, it did not also put into place a chain of events that completely invalidates the provisions contained therein.