The US Supreme Court heard oral argument Wednesday in Mission Product Holdings, Inc. v. Tempnology, LLC, a case questioning what happens to a licensee’s trademark rights when a licensor goes bankrupt.

Tempnology, LLC, a company specializing in cooling technology for towels and headbands among other things, had licensed a series of patents and trademarks to Mission Products Holdings in 2012. In 2015 Tempnology voluntarily filed for bankruptcy. Mission Products filed suit in bankruptcy court the next day seeking to maintain its licenses from Tempnology. The 2015 Bankruptcy Court decision initially ended Mission’s trademark rights finding that trademarks were not intellectual property under 11 USC § 365(n). This was reversed by the First Circuit’s Bankruptcy Appellate Panel in 2016 but then reversed again by the full First Circuit in 2018, reinstating the original bankruptcy court decision.

Mission Products appealed this case to the Supreme Court and asked the court to resolve whether a licensee’s rights are terminated when the licensor goes bankrupt and rejects the license agreement. The Supreme Court granted certiorari in October 26 and heard oral arguments Wednesday. In oral arguments, Justice Sonia Sotomayor questioned how trademark holders could have greater rights than intellectual property owners while Justice Neil Gorsuch expressed concern that this case might be mooted by the fact that Mission was purchasing goods from Tempnology who was no longer in a position to fill new orders. Justices Elena Kagan and Stephen Breyer questioned Tempnology on whether there was any analogous case where outside bankruptcy a breaching licensor can force the licensee to stop using a trademark.

The decision on this case is expected to have great impact as there has been a significant split in the circuit courts over the effects of rejection on intellectual property from the Lubrizol judgment especially when examined against Congress enacting 11 U.S. Code § 365.