On May 20, 2019, the Supreme Court issued its opinion in Mission Product Holdings, Inc. v. Tempnology, LLC (decision available here). At issue was whether, when a bankruptcy trustee rejects a trademark-licensing executory contract under 11 U.S.C. § 365(a), the rejection of such a contract deprives the licensee of its right to use the trademark-at-issue.
(11 U.S.C. § 365(a) generally allows a bankruptcy trustee to “assume or reject any executory contract” of the debtor. An “executory” contract is a contract that neither party has finished performing. A debtor’s rejection of a contract under Section 365(a) “constitutes a breach of such contract.” 11 U.S.C. § 365(g). But the breach is deemed to occur “immediately before the date of the filing of the [bankruptcy] petition,” rather than on the actual post-petition rejection date, see 11 U.S.C. § 365(g)(1), which means that the breach-of-contract claim against the bankrupt estate is “unlikely to be ever paid in full.”)
The Supreme Court held that the debtor-licensor’s rejection of the trademark-licensing contract does not deprive the licensee of its right to use the trademark. In other words, a rejection of the contract breaches the contract, but does not rescind it. As such, “all the rights that would ordinarily survive a contract breach, including those conveyed here, remain in place.”