This article is written by Elizabeth A. Patton and originally appeared on the Fox Advertising Law blog, https://advertisinglaw.foxrothschild.com
This week, the U.S. Supreme Court issued a decision in the Product Holdings, Inc. v. Tempnology, LLC N/K/A Old Cold LLC case previously blogged about here and here. The issue in that case was 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. The Supreme Court decided 8-1 in favor of the former — i.e. that a bankrupt trademark owner/licensor cannot revoke a trademark licensee’s right to use the already-licensed mark. This reverses what the First Circuit held and is more consistent with the exception Congress previously created for the licensing of patents and copyrights, where licensees of such intellectual property retain their rights even after a licensing agreement has been rejected by a bankrupt intellectual property owner.
In Monday’s opinion written by Justice Kagan, the Supreme Court found that the protections granted to bankrupt companies by Section 365 of the Bankruptcy Code do not extend this far and that a rejection of licensing obligations by a bankrupt trademark owner/licensor would breach the contract but would not constitute a rescission of the contract. Justice Sotomayor concurred to point out that non-bankruptcy law could still impact individual cases and that other forms of intellectual property are still governed by different rules. Justice Gorsuch dissented on the basis of the license agreement at issue having already expired. Regardless of what happens next in this specific case, the Supreme Court’s ruling has implications for other cases across the country and an impact on future licensing disputes.