2019 Bankruptcy Truisms: "Rejection" of an Executory Contract Means "Breach," and Not "Rescission," and a Trademark Is Not a Type of Intellectual Property
Sonia Singh and Zev Shechtman
Sonia Singh is an associate at Danning, Gill, Israel & Krasnoff, a boutique Los Angeles law firm specializing in business bankruptcy, insolvency and restructuring.
Zev Shechtman is a partner at Danning, Gill, Israel & Krasnoff, a boutique Los Angeles law firm specializing in business bankruptcy, insolvency and restructuring.
The Supreme Court recently held, in Mission Product Holdings, Inc. v. Tempnology, LLC,1 that a debtor-licensor’s choice in bankruptcy to reject an executory trademark licensing agreement does not necessarily deprive the non-debtor licensee of its rights to use the trademark moving forward. The Supreme Court determined that the licensor’s choice to reject an executory contract under 11 U.S.C. § 365(a) functions as a breach of contract and has the same effect as a breach outside of bankruptcy, instead of unwinding the rejected contract as if it never existed. Specifically, the Supreme Court found that Mission Product Holdings, Inc.’s ("MPH") right to use the trademark "Coolcore," which was granted to it by Tempnology, LLC ("Tempnology") pursuant to a nonexclusive license, was not necessarily disturbed by Tempnology’s rejection of the license in its bankruptcy proceeding.