United States: Mission Products v. Tempnology: Is Bankruptcy The End For Trademark Licenses?

Oral argument before the Supreme Court was held on February 20 in the much-watched and even more intensely discussed trademark dispute Mission Product Holdings, Inc. v. Tempnology, LLC.1 The case presents the difficult and multifaceted question: Does bankruptcy law insulate the right of a trademark licensee to continue using the licensed mark despite the bankrupt trademark licensor's decision to "reject" the remaining term of the trademark license?

It may come as a surprise to some that trademark rights, under the Bankruptcy Code, are not categorized as "intellectual property." 2 Patents, copyrights and trade secrets are included; Congress, by design, omitted trademarks from the category, recognizing that trademarks are very different from the other types of IP.

Therefore, the enactment of Bankruptcy Code § 365(n) in 1988, which protects licensees of rights in the statutorily defined types of IP from termination when the licensor files for bankruptcy protection, left that question open for further judicial analysis and resolution in the case of ongoing trademark licenses when the licensor goes bankrupt. The Mission Products case may – or may not – provide that answer.

Debtors in bankruptcy reorganization are generally allowed to "reject" executory contracts – that is, to be freed from any ongoing obligations to render performance otherwise owed to the counterparty under an ongoing license agreement.3 The objective is to enhance the debtor's prospects to achieve a successful reorganization of its financial and business affairs. But recognizing the particular hardships that such rejection can impose on certain types of non-bankrupt counterparties, bankruptcy law imposes limitations on the right of rejection for certain types of agreements. These "special cases" include non-bankrupt lease tenants, purchasers of timeshares, parties to collective bargaining agreements, and, of particular interest here, licensees of intellectual property rights.4 Given the constitutional purpose under the patent and copyright laws to encourage and reward intellectual innovation, and the integral role of commercial licensing in those domains, §365(n) provides explicit protection for licensees of such IP rights against debtor licensor rejection of executory licenses.5

Trademarks, on the other hand, do not fundamentally reward innovation, but rather serve to assure the public that the products and services marketed under an established brand will provide the quality, performance and advantages that have become associated with that brand. This imposes on the trademark owner the obligation to monitor and police the activities of trademark licensees to ensure that the public's expectations are fulfilled. A license agreement that omits the duty to police is known as a "naked license" If the trademark owner abdicates its duty to police, the mark itself may become unenforceable. But if the licensee continues to use the mark notwithstanding the bankrupt trademark owner/licensor's rejection of the license, a continuing obligation by the debtor licensor to police may interfere with the reorganization plan, or may simply not be doable. Or, if bankruptcy law both allows continued trademark use by the licensee following rejection, while extinguishing any duty of the bankrupt licensor to continue policing that use, then by definition, a naked license has been created.

On the other hand, the success of the non-bankrupt licensee's business may be dependent on the continuing viability of the trademark license. Allowing the debtor licensor to cancel that license, presumably to negotiate more advantageous arrangements to exploit the brand in its reorganization, is a harsh and arguably inequitable outcome. The debtor licensor's rejection is deemed to be a breach of the license, entitling the licensee to pre-bankruptcy damages, but that remedy may not provide adequate relief.

The Mission Products case invites the Supreme Court to solve this conundrum, but on a factual record that is less than ideal (more on that later). Tempnology owns patents and related IP for manufacturing stay-cool fabrics for sportswear. It licensed the patents as well as the associated trademark to Mission Products, a sports apparel retailer. The agreement included a right of termination for convenience, with a two-year wind-down period. Mission Products exercised its right to terminate the agreement. About 15 months later, Tempnology filed for bankruptcy reorganization and rejected the trademark license portion of the agreement.

The First Circuit ruled that the rejection of the trademark license by Tempnology was effective and terminated Mission Products' right to use the licensed marks. Mission Products sought Supreme Court review, arguing that the First Circuit's decision is in error and is at odds with the contrary result reached in the Seventh Circuit in Sunbeam Products v. Chicago Manufacturing LLC.6 In Sunbeam, the Seventh Circuit decided that rejection of the trademark license does terminate any further performance obligations of the debtor-licensor (including the obligation to police use of the mark) but does not terminate the licensee's continuing right to use the licensed mark under the terms of the license.

At oral argument, the questioning by the justices did not provide any clear indication of the direction the Court is likely to take. Justice Samuel Alito seemed to be sympathetic to the position of the non-bankrupt trademark licensee, analogizing the termination of the right to use the licensed mark to a bankrupt landlord trying to terminate a tenancy under the right of contract rejection (a result specifically not allowed under § 365 (h)). But Justice Stephen Breyer seemed to tilt in the opposite direction with a different "housing" analogy, imagining a landlord renting an igloo with an obligation to provide constant air conditioning. If the bankrupt landlord can no longer keep the igloo cold, the igloo will disappear; similarly, when a bankrupt trademark owner cannot police the licensed mark, the mark itself may become unenforceable.

How the Court will decide the issue is not the only question; equally in doubt is whether the Court will choose to make a dispositive ruling in this case. Mission Products itself had elected to terminate its agreement with Tempnology before the bankruptcy was filed, and by the time the trademark license was rejected, there were only a few months of permitted trademark use remaining under the two-year wind-down period. So, the record before the Court does not present in a practical sense the dilemma between the bankrupt debtor's right to be free of continuing policing obligations, and the prejudice to the licensee created by terminating further use of the mark following rejection. Tempnology has argued that, even if the decision below is doubtful, this is not the right case for the Court to decide what the International Trademark Association has described as "the most significant unresolved legal issue in trademark licensing." Justice Neil Gorsuch alluded to these circumstances at oral argument, expressing some concern whether the case may be moot.

But multiple filers of amici briefs, joined by the U.S. Solicitor General, have urged the Court to settle the issue now, in favor of allowing trademark licensees to continue use notwithstanding bankruptcy rejection. We – along with tens of thousands of trademark owners and licensees – will be watching, and we will report the outcome here.


1. Mission Products Holdings, Inc. v. Tempnology, LLC, case no. 17-1657 before the United States Supreme Court.

2. 11 U.S.C. § 101(35A).

3. 11 U.S.C. § 365(a).

4. See 11 U.S.C. § 365(h) and (n), and § 1113.

5. § 365(n) was a direct congressional reaction to the holding in Lubrizol Enter., Inc. v. Chicago Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985), which upheld a debtor patent licensor's right to reject an executory patent license and terminate the licensee's right to continue practicing the patent.

6. Sunbeam Products v. Chicago Manufacturing, 686 F.3d 372 (7th Cir. 2012).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions