Mission Product Holdings, Inc. v. Tempnology, LLC
The Supreme Court ruled that when a bankrupt company cancels a trademark license under bankruptcy law, the other side keeps the rights it already had under the contract — the cancellation counts as a breach, not as unwinding the deal entirely.
The decision resolves a split among federal appeals courts and means businesses that license trademarks, patents, or other intellectual property from a company that later goes bankrupt can generally keep using what they were licensed to use, even after the bankrupt company walks away from its remaining duties.
“A rejection breaches a contract but does not rescind it.”
The Court's core holding on what happens when a bankrupt company cancels a contract.
How it got here: A bankruptcy court sided with Tempnology; the Bankruptcy Appellate Panel reversed for Mission; the First Circuit sided with Tempnology again, prompting Supreme Court review to resolve a circuit split.
The Case in Depth
What happened
Tempnology made cooling athletic gear under the "Coolcore" brand and licensed Mission Product Holdings to distribute certain products and use the Coolcore trademarks. Tempnology filed for bankruptcy before the license was set to expire and asked to cancel ("reject") the agreement, then argued that doing so also stripped Mission of its right to keep using the Coolcore trademarks.
The question before the Court
When a company selling clothing goes bankrupt and cancels a trademark licensing deal, does the other business lose its right to keep using the trademark?
The Court's answer
No — canceling ("rejecting") a contract in bankruptcy only counts as a breach of that contract, not as erasing it entirely, so the licensee keeps whatever rights it already received. The Court read the bankruptcy statute's own words — rejection "constitutes a breach" — literally, and applied ordinary contract law: a breach lets the injured party sue for damages but doesn't cancel rights already granted, like Mission's right to keep using Tempnology's trademarks.
This meant Mission could keep using the Coolcore trademarks for as long as the original license would have run, even though Tempnology no longer had to perform its own duties under the deal. The Court rejected Tempnology's arguments that special statutory carve-outs for other license types, or trademark law's quality-control concerns, justified treating trademark licenses differently.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Businesses that license trademarks, franchises, or other intellectual property now have more certainty that a licensor's bankruptcy won't strip away their rights to keep selling products or using a brand. This protects licensees' investments and planning, while limiting a bankrupt company's ability to use bankruptcy to claw back rights it already gave away.
What changes now
The case returns to the lower courts, where Mission can pursue its claim that it is owed damages for lost profits during the period it could not use the Coolcore trademarks. The ruling itself is final on the legal question of how rejection works under bankruptcy law nationwide, but it does not resolve whether Mission will actually recover money — that remains to be litigated on remand.
What this does not decide
The Court did not decide that every trademark licensee automatically keeps unlimited rights after a licensor's bankruptcy — special contract terms or state law could still limit a licensee's rights in individual cases. The ruling also does not address Mission's separate claim to exclusive distribution rights, which the Court found had been waived below.
Concurrences and dissents
Concurrence — Justice Sotomayor
Justice Sotomayor joined the Court in full but flagged two limits on the holding: the ruling does not guarantee every trademark licensee an unfettered right to keep using a mark, since contract terms or state law could still cut off rights in some cases; and trademark licensees' post-rejection remedies remain broader in some ways than those of patent or copyright licensees, who are governed by a separate, more restrictive statutory provision.
Dissent — Justice Gorsuch
“This Court is not in the business of deciding abstract questions, no matter how interesting.”Gorsuch's opening objection that the case was moot and should not have been decided.
Justice Gorsuch argued the case was moot and should be dismissed as improvidently granted, because the license had already expired and no ruling could restore Mission's ability to use the trademarks. He was skeptical that Mission's fallback damages theory kept the case alive, reasoning that Tempnology's act of seeking a court ruling was protected petitioning activity that could not lawfully support a damages claim.
How the Court got there
The legal reasoning, step by step
- The Court read the bankruptcy law's rejection provision literally: rejecting a contract 'constitutes a breach,' and breach is an ordinary contract-law term, not a special bankruptcy concept, so its everyday meaning outside bankruptcy controls.
- Outside bankruptcy, when one side breaches a contract, the breach doesn't cancel rights the other side already received under the deal — the non-breaching party can keep exercising those rights while suing for damages caused by the breach.
- Applying that same rule to bankruptcy, the Court reasoned that a bankrupt company's rejection of a contract has the identical effect: it excuses the bankrupt company from further performance but cannot claw back rights, like trademark use, already granted to the other side.
- The Court reinforced this reading with the general bankruptcy principle that a bankruptcy estate can never hold more property or rights than the debtor had before filing, so rejection cannot manufacture new rights for the debtor that erasing a contract might.
- The Court rejected the argument that because a few narrow provisions let certain licensees (like patent licensees) keep rights after rejection, all other licensees --- including trademark licensees --- must lose their rights; those provisions were piecemeal fixes to specific court rulings, not evidence of a broader rule.
- The Court also rejected the argument that trademark law's quality-control duties justified a special rule for trademarks, finding that such policy concerns could not override the statute's plain text and would improperly extend to nearly all contracts, not just trademark licenses.
Doctrinal impact
Cases affected by this decision
Distinguishes Lubrizol Enterprises v. Richmond Metal Finishers (756 F. 2d 1043)
The Court noted Congress overturned this ruling for patent licenses by statute, but that did not require the same rule for trademarks.