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High Court Bankruptcy IP Case May Spur Rejection Litigation

Law360
May 22, 2019

Laura Davis Jones and Jonathan Kim recently co-authored an article in Law360 entitled “High Court Bankruptcy IP Case May Spur Rejection Litigation,” which was published on May 22, 2019. In the article, Laura and Jonathan discuss the Supreme Court ruling in the case of Mission Product Holdings Inc. v. Tempnology LLC, signifying that debtors with disadvantageous trademark license agreements will likely be unable to get out of these licenses through rejection.

According to the article, the Supreme Court’s opinion relied mostly on its interpretation of section 365(g)  of the Bankruptcy Code, which provides that “the rejection of an executory contract or unexpired lease of the debtor constitutes a breach of such contract or lease.” The article goes on to state that “given that rejection ‘constitutes a breach’ and the word ‘breach’ is not a specialized bankruptcy term but has the same meaning in contract law outside of bankruptcy, the debtor-licensor’s breach within bankruptcy could not undo licensing rights that would have remained with the licensee had the breach occurred outside of bankruptcy.”

Laura and Jonathan write that the ruling is a significant win for trademark licensees, as the licensee can continue to use the trademark through the end of the contractual license term, if desired. However, the ruling may have “left open some doors” for arguments for exceptions and/or expansions of the opinion, potentially leading to increased litigation and transaction costs.

Click here for the article (subscription required).