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In Mission Product Ruling, Supreme Court Clarifies Longstanding Circuit Split on Effects of Bankruptcy on Trademark Licenses

As predicted, the U.S. Supreme Court has ruled that a debtor’s rejection of a license agreement in bankruptcy proceedings does not mean the licensee no longer retains rights to the mark. Instead, the Court said that rejection of the contract – and therefore the trademark license – constitutes a breach of the contract/ license, not a revocation. In Mission Product Holdings, Inc. v. Tempnology LLC, the High Court was asked to determine whether a trademark licensor’s rejection of a licensing agreement during bankruptcy proceedings terminates the rights of the licensee which would otherwise survive a licensor’s breach of contract under applicable non-bankruptcy law. In an 8-1 decision, the Court held that the rejection of an executory contract during bankruptcy has the same effect as breach of that contract outside of bankruptcy and thus cannot rescind rights previously granted by the contract. As a result, Tempnology’s rejection in bankruptcy of its agreement to license trademarks to Mission Product Holdings didn’t rescind Mission’s rights to continue using those trademarks.

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