Major Ruling Re Trademark Licenses In Bankruptcy

In an 8-1 decision handed down on May 20, the Supreme Court reversed the 1st Circuit Court of Appeals and ruled that a debtor-licensor’s rejection of a trademark license agreement does not terminate the rights of the licensee to continue using the trademark where those rights would otherwise survive the licensor’s breach of the agreement under non-bankruptcy law. According to an article on Mayer Brown’s Real Bankruptcy Intel blog, the decision “resolves the most significant unanswered question regarding the treatment of trademark licenses in bankruptcy.” But in Justice Sotomayor’s concurring opinion, she noted that the decision does not necessarily give a non-debtor trademark licensee the “unfettered right” to continue using a licensed trademark post-rejection. That right is still governed by applicable non-bankruptcy law, and special terms in the licensing agreement or under state law may affect the right to continue using the mark in certain cases.