On June 11, 2018, Mission Product Holdings, Inc. (“MPHI”), a developer of chemical free cooling fabrics, petitioned the U.S. Supreme Court for a writ of certiorari to resolve a circuit split on whether a licensee’s right to use a trademark survives bankruptcy rejection of the underlying licensing agreement by the debtor-licensor. In Mission Prod. Holdings Inc. v. Tempnology LLC (In re Tempnology LLC), the First Circuit held that a licensee’s rights under a rejected trademark license do not survive rejection by the debtor-licensor. This result was consistent with the Fourth Circuit’s ruling on this issue, but contrary to the Seventh Circuit’s ruling. If the Supreme Court grants the certiorari petition, its ruling will resolve this long-standing circuit split on the rights (or lack thereof) of a trademark licensee where the license agreement has been rejected in bankruptcy by the debtor-licensor.

REJECTION OF EXECUTORY CONTRACTS GENERALLY -

Section 365 of the Bankruptcy Code provides a debtor with the right to assume (or assume and assign) or reject an executory contract. An executory contract is a contract in which both sides still have unperformed obligations; a trademark licensing agreement is typically found to be an executory contact. Under Section 365(g)(1) of the Bankruptcy Code, the rejection of an executory contract is deemed to constitute a breach of the agreement immediately before the petition date. The executory contract counterparty then has a general unsecured claim for damages based on such breach.