Bankruptcy Rejection of Trademark License Need Not Terminate Licensee’s Right to Use Marks
Mission Product Holdings, Inc. v. Tempnology, LLC, __ U.S. __, 2019 WL 2166392 (May 20, 2019) (KAGAN, J. (joined by Roberts, C.J., Thomas, Ginsburg, Breyer, Alito, Sotomayor, Kavanaugh, J.J.); Concurrence by Sotomayor, J.; Dissent by Gorsuch, J.) (1st Cir. (KAYATTA, Lynch, Tuorruella (CIP/DIP)) / 1st Cir. BAP / Bankr. D.N.H. (Deasy)) (5 of 5 stars)
Supreme Court holds that Tempnology’s rejection of a trademark license during bankruptcy does not deprive Mission (as licensee) of its rights to use Tempnology’s trademark, and reverses/remands First Circuit’s contrary determination (879 F.3d 389 (1st Cir. 2018)). Mission’s claim for money damages (essentially, lost profits) arising from its inability to use the licensed marks is a live dispute, and thus the opinion rejects Tempnology’s mootness defense. “For better or worse, nothing so shows a continuing stake in a dispute’s outcome as a demand for dollars and cents.” Op. at 6. That Tempnology’s bankruptcy has left it with “nothing to satisfy Mission’s judgment” did not require a different result. The opinion also rejects Tempnology’s argument that Mission chose not to use the marks during the period after the bankruptcy court held the license had been terminated, and so bore responsibility for any damages. “Mission need not have flouted a crystal-clear ruling and courted yet more legal trouble to preserve its claim.” Id. at 7.
The opinion then analyzes the Bankruptcy Code and determines that its provisions relating to rejection of executory contracts (11 U.S.C. § 365) establish that rejection will “constitute a breach.” Thus, “[t]he debtor can stop performing its remaining obligations under the agreement. But the debtor cannot rescind the license already conveyed. So the licensee can continue to do whatever the license authorizes.” Op. at 10. The opinion rejects Tempnology’s argument that because trademark licenses do not appear in § 365(h) and (i)’s recitation of contract categories where contract rights survive rejection, Mission’s trademark license rights did not survive. “[T]hat argument pays too little heed to the main provisions governing rejection and too much to subsidiary ones.” Id. at 12. The opinion reasons that these exceptions were, “as often as not, correcting a judicial ruling of just the kind Tempnology urges,” id. at 13, and were intended more to underline the general rule than to provide exceptions to it. The opinion also rejects Tempnology’s argument that trademark licensors should be treated differently than other licensors.
Concurrence: Justice Sotomayor notes that today’s holding “does not decide that every trademark licensee has the unfettered right to continue using postrejection,” Concur. at 1, and notes that special features of state law or contract might affect the analysis in other cases. She also notes that § 365(n) specifically relates to contracts in other types of intellectual property (e.g., patents, copyrights), but not trademarks, and cases involving such contracts should be resolved under that section.
Dissent: Justice Gorsuch would have held Mission’s appeal moot because “[a]fter the bankruptcy court ruled, the license agreement expired by its own terms, so nothing we might say here could restore Mission’s ability to use Tempnology’s trademarks.” Dissent at 1. He questions the validity of Mission’s damages claim.
KEYWORDS: TRADEMARK; BANKRUPTCY; EXECUTORY CONTRACTS