Has “the most significant unresolved legal issue in trademark licensing” finally found some closure? Circuit courts have long been split over whether bankrupt trademark owners could revoke a license and on what the effect is, generally, of a rejection of an executory contract. On Monday May 20th, 2019 the U.S. Supreme Court ruled that defunct brand owners (as debtors in Chapter 11) cannot use bankruptcy law to unilaterally revoke (reject) a trademark license agreement. The court held that bankruptcy “rejection” of an executory contract trademark license (a contract that neither party has finished performing) under Section 365 was akin to a breach of contract outside of bankruptcy. Per Justice Kagan: “A rejection (of any executory contract) breaches a contract but does not rescind it.” The licensee should not lose its right to use the debtor’s trademark under license. [Kagan] “Such an act cannot rescind rights that the contract previously granted.”
You can also click here for a quick summary of the decision from Law360.