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Mission Prod. Holdings v. Tempnology, LLC

Supreme Court of the United States

February 20, 2019, Argued; May 20, 2019, Decided

No. 17-1657.

Opinion

Justice Kagan delivered the opinion of the Court.

Section 365 of the Bankruptcy Code enables a debtor to “reject any executory contract”—meaning a contract that neither party has finished performing. 11 U. S. C. §365(a). The section further provides that a debtor’s rejection of a contract under that authority “constitutes a breach of such contract.” §365(g).

Today we consider the meaning of those provisions in the context of a trademark licensing agreement. The question is whether the debtor-licensor’s rejection of that contract deprives [***5]  the licensee of its rights to use the trademark. We hold it does not. A rejection breaches a contract [*1658]  but does not rescind it. And that means all the rights that would ordinarily survive a contract breach, including those conveyed here, remain in place.

This case arises from a licensing agreement gone wrong. Respondent Tempnology, LLC, manufactured clothing and accessories designed to stay cool when used in exercise. It marketed those products under the brand name “Coolcore,” using trademarks (e.g., logos and labels) to distinguish the gear from other athletic apparel. In 2012, Tempnology entered into a contract with petitioner Mission Product Holdings, Inc. See App. 203-255. The agreement gave Mission  [**883]  an exclusive license to distribute certain Coolcore products in the United States. And more important here, it granted Mission a non-exclusive license to use the Coolcore trademarks, both in the United States and around the world. The agreement was set to expire in July 2016. But in September 2015, Tempnology filed a petition for Chapter 11 bankruptcy. And it soon afterward asked the Bankruptcy Court to allow it to “reject” the licensing agreement. §365(a).

Chapter 11 of the Bankruptcy Code [***6]  sets out a framework for reorganizing a bankrupt business. See §§1101-1174. The filing of a petition creates a bankruptcy estate consisting of all the debtor’s assets and rights. See §541. The estate is the pot out of which creditors’ claims are paid. It is administered by either a trustee or, as in this case, the debtor itself. See §§1101, 1107.

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139 S. Ct. 1652 *; 203 L. Ed. 2d 876 **; 2019 U.S. LEXIS 3544 ***; 67 Bankr. Ct. Dec. 51; Bankr. L. Rep. (CCH) P83,378; 27 Fla. L. Weekly Fed. S 813; 2019 WL 2166392

MISSION PRODUCT HOLDINGS, INC., Petitioner v. TEMPNOLOGY, LLC, nka OLD COLD LLC

Notice: The LEXIS pagination of this document is subject to change pending release of the final published version.

Prior History:  [***1] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT

Mission Prod. Holdings, Inc. v. Tempnology, LLC (In re Tempnology, LLC), 879 F.3d 389, 2018 U.S. App. LEXIS 870 (1st Cir., Jan. 12, 2018)

Disposition: 879 F. 3d 389, reversed and remanded.

CORE TERMS

trademark, rights, licensee, license, counterparty, provisions, terminate, license agreement, damages, intellectual property, executory contract, bankruptcy court, marks, licensor’s, contracts, survive, dealer, claim for damages, copier, lease, contractual right, law firm, constitutes, moot, general rule, obligations, patent, breach of contract, right to use, reorganizations

Bankruptcy Law, Executory Contracts & Unexpired Leases, Powers to Assume & Reject, Executory Contracts, Administrative Powers, Rejections, Bankruptcy, Estate Property, Contents of Estate, Examiners, Officers & Trustees, Duties & Functions, Reorganizations, Civil Procedure, Preliminary Considerations, Justiciability, Mootness, Remedies, Damages, Monetary Damages, Business & Corporate Compliance, Breach, Contracts Law, Breach, Trademark Law, Conveyances, Licenses, Capacities & Roles