Mission Product v. Tempnology: rejection is a breach

A trademark license survived the central legal question

Tempnology had granted Mission Product rights under a contract that included trademark licensing. After Tempnology entered bankruptcy and rejected the agreement, the parties disputed whether rejection also ended Mission’s right to use the marks. The case required interpretation of section 365’s statement that rejection constitutes a breach.

The Court first concluded that a live controversy remained because Mission advanced a plausible damages claim arising from its inability to use the trademarks. It then addressed the consequences of rejection.

The ordinary consequence of breach supplies the baseline

The Court held that rejection has the same effect as breach outside bankruptcy and cannot by itself rescind previously granted rights. If a right would survive a licensor’s breach under the contract and applicable nonbankruptcy law, rejection does not automatically erase it.

That interpretation respects the distinction between rejecting future performance obligations and avoiding a completed transfer. The Court rejected an inference that specific protections elsewhere in section 365 require all other contractual rights to disappear on rejection. Reorganization policy did not justify reading breach as rescission.

The contract still needs careful review

The holding does not make every license perpetual or guarantee every counterparty continued performance. Contract terms, applicable law, expiration, and the nature of the particular right remain important. A licensee’s surviving use rights and its entitlement to damages or services are separate questions.

For a practical review, identify precisely which rights were granted, their duration, termination conditions, and what a breach would do outside bankruptcy. Then read the rejection order and any special statutory provisions that apply. A headline saying that the contract was rejected cannot replace that analysis.

Decision and limits

The May 20, 2019 opinion reversed and remanded. This note summarizes that decision rather than later litigation or developments in licensing law. It should not be used as a conclusion about the enforceability of a particular license without further research.