SCOTUS Opinion: Trademark Rights Survive Contract Rejection In Bankruptcy

Under bankruptcy law, a debtor may reject any executory contract, being a contract where performance remains due on both sides. In Mission Product Holdings, Inc. v. Tempnology, LLC, Tempnology entered into an executory contract giving Mission a license to use its trademarks. Tempnology then filed for Chapter 11 bankruptcy, and asked the Bankruptcy Court to allow it to reject the contract. That court allowed the rejection, which permitted Tempnology to stop performing under the contract. However, Tempnology argued that the rejection also terminated Mission’s trademark rights. The Bankruptcy Court agreed, but an appellate panel reversed, relying on a decision by the Seventh Circuit. The First Circuit reinstated the termination of trademark rights, creating a circuit split. The Court, in an opinion by Justice Kagan, reversed, holding that a rejected contract operates as a breach of that contract, not as a rescission of all rights conveyed thereunder. Thus, Mission still retained the trademark license. Justice Sotomayor filed a concurrence noting that this case did not resolve what would happen if a licensee was the one rejecting the contract, and that trademark licensees like Mission have more expansive rights and remedies available under the Bankruptcy Code than other licensees. Justice Gorsuch dissented, arguing that the case was moot since the license contract ended years ago. A link to the opinion is here.