Business as Usual for Trademark Licensees
On May 20th, the U.S. Supreme Court ruled that a trademark licensor in bankruptcy can reject a trademark license as an executory contract under 11 U.S.C. § 365(a) (Mission Product Holdings, Inc. v. Tempnology, LLC, (139 U.S. 1652, rev’g 879 F.3d 389 (1st Cir. 2018)). However, the rejection does not give the licensor the right to terminate the licensee's rights to use the licensed trademark. The bankruptcy statue provides that a rejection "constitutes a breach" (11 USC § 365(g)). The Court found that this breach was not the equivalent of a recission. Rather, this breach creates a claim for damages and, importantly, does not rescind the rights the contract previously granted -- meaning that a licensee can continue to use the trademark so long as the licensee continues to fulfill its contractual obligations.