Supreme Court to Decide Trademark Licensee Rights in Bankruptcy Suit

The United States Supreme Court will hear arguments over whether a trademark license agreement remains enforceable after a trustee’s refusal to honor the agreement upon the company’s filing of bankruptcy.

In Mission Product Holdings v. Tempnology, Mission Product Holdings (“Mission”) and Tempnology agreed to a trademark licensing agreement where Mission would be able to sell Tempnology’s patented and proprietary products in conjunction with use of the Tempnology trademark.

Trademark License Thrown Out in Bankruptcy

Tempnology, however, ended up filing for bankruptcy. In the bankruptcy estate proceedings, the trustee chose to reject the trademark license agreement, relying on Section 365(a) of U.S. Bankruptcy Code, which gives trustees the power to refuse to honor executory contracts. By contrast, Mission argues that the licensing agreement should fall under the many bankruptcy statutory exceptions included in Section 365(a) that allows specific types of contracts to retain specific rights to be exercised.  In this case, Mission is liking to draw comparison to courts having allowed patent license rights to be exercised.  Tempnology, however, may point out that Congress had, at one point, specifically considered whether to include trademark licenses under the allowable exceptions but ultimately chose not to do so.

Before the Supreme Court, Mission is expected to argue that Tempnology’s rejection and bankruptcy filing should not qualify as legal termination of all existing licensing rights in the agreement.  While the lower district courts have ruled in Tempnology’s favor, the Supreme Court has agreed to review the trademark licensing aspects of the suit and hear arguments this week.

INTA Suggests Bankruptcy Trustee’s Rejection of Trademark License Unfair

Intellectual property attorneys are closely following the case, and amicus briefs have already been filed by a number of high-profile intellectual property organizations.  Specifically, the American Intellectual Property Law Association (“AIPLA”), the Intellectual Property Owners Association (“IPO”), and the International Trademark Association (“INTA”) have all submitted briefs to the Supreme Court in conjunction with the suit.  For its part, INTA has suggested that the Supreme Court deciding in Tempnology’s favor would mean that a bankruptcy trustee’s rejection of a trademark license agreement would unfairly allow for breach of the obligations by the licensor and unfairly deny the licensee’s right to continue use a properly licensed trademark.

Although some experts believe that Congress’s previous choice to not include trademark licenses in the exceptions to Section 365(a) will ultimately prove most persuasive to the Supreme Court, others note that the current Supreme Court has been more than willing to break with decades of trademark law precedent, dramatically overturning and reshaping trademark law with new and recent landmark decisions.

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