First Circuit Court of Appeals

As I previously blogged about, there is a circuit split as to whether, when a trademark owner/licensor files for bankruptcy, the licensee of the trademark can legally continue use of the mark or whether the trademark owner/licensor can reject its obligations under the licensing agreement and effectively prohibit the licensee’s continued use of the mark.  A case arising from the First Circuit, Mission Product Holdings, Inc. v. Tempnology, LLC N/K/A Old Cold LLC, involves this precise question and has made its way to the United States Supreme Court.

At the end of last week, following the submission of briefs from the parties and others, the Supreme Court decided to grant certiorari in the case.  According to SCOTUS blog, the issue presented is: “Whether, under Section 365 of the Bankruptcy Code, a debtor-licensor’s “rejection” of a license agreement—which “constitutes a breach of such contract,” 11 U.S.C. § 365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable non-bankruptcy law.”

Not surprisingly, the Supreme Court did not provide any reasoning or insight into its decision to grant cert.  Nor did it directly respond to the parties’ positions regarding a recent order in Tempnology’s underlying bankruptcy case, which Tempnology argued (and Mission Product Holdings disagreed) may have a bearing on the Court’s decision to do so.

 

When a trademark owner/licensor files for bankruptcy, there is an open question as to whether the licensee of the trademark can legally continue use of the mark or whether the trademark owner/licensor can reject its obligations under the licensing agreement and effectively prohibit the licensee’s continued use of the mark.  When it comes to the licensing of patents and copyrights, the question is already closed: Congress created an exception in U.S. bankruptcy law that allows licensees of such intellectual property to retain their rights even after a licensing agreement has been rejected by the intellectual property owner who has filed for bankruptcy.  However, whether purposely or not, Congress did not mention trademarks in the exception, thereby leading to the current question.

The U.S. Supreme Court is currently considering whether to grant certiorari in a case that would answer this question and resolve a circuit-split on the issue.  That case is Mission Products Holdings, Inc. v. Tempnology, LLC N/K/A Old Cold LLC, which was decided by the First Circuit early this year in favor of the trademark licensor, Tempnology.  The First Circuit held that Tempnology’s rejection of its licensing agreement with Mission Products Holdings caused the latter to lose its trademark rights under the parties’ agreement in light of Tempnology’s bankruptcy.  Now Mission Products Holdings, Inc., the trademark licensee, has filed a petition seeking review by the Supreme Court and a ruling that a trademark licensee’s rights to use a trademark cannot be revoked upon the trademark owner/licensor filing for bankruptcy.

The International Trademark Association (INTA) has already filed an amicus brief asking that the Supreme Court take the case and resolve the dispute in favor of trademark licensees, who make significant investments in their businesses using the licensed marks.  According to INTA’s brief, trademarks “are the most widely used form of registered intellectual property” and a ruling in favor of trademark licensees “enhances the value of trademark licenses and promotes the stability of the trademark system.”  Tempnology’s response to Mission Product Holdings’ petition is due in early September, and the case is set for conference in late September, after which the justices may decide to hear the case (or not).