Mission Product Holdings v. Tempnology: When Bankruptcy Meets Branding

Picture this: You’ve got a company, Tempnology, known for its “Coolcore” trademarks, licensing them out to Mission Product Holdings. Things are chugging along until Tempnology hits financial turbulence and files for bankruptcy. Now, here’s the million-dollar question: Does Mission get to keep using those snazzy trademarks, or does Tempnology’s bankruptcy filing pull the rug out from under them? That’s exactly what the Supreme Court tackled in Mission Product Holdings v. Tempnology.

The Bankruptcy Balancing Act

First, let’s set the stage. Under Section 365(a) of the Bankruptcy Code, a bankrupt company can “reject” executory contracts—basically, contracts where both sides still have work to do. This rejection isn’t like ripping up the contract and pretending it never existed. Nope, Section 365(g) treats rejection as a breach of contract. In regular, non-bankruptcy land, if someone breaches a contract, the other party doesn’t lose all their rights—they can sue for damages and often continue to benefit from what was already granted.

This image was created with Leonardo.ai.

This image was created with Leonardo.ai.

But Tempnology argued that trademarks are different. They claimed that rejecting the contract meant Mission had to stop using the Coolcore marks altogether. Why? Because, according to Tempnology, trademark law requires the owner to keep policing the brand’s use. If they can’t do that effectively during bankruptcy, the trademark’s value might tank. Makes sense, right? Well, not so fast.

The Circuit Split: Battle of the Bankruptcy Brains

The First Circuit agreed with Tempnology. They thought that since trademarks weren’t explicitly protected under Section 365(n)—a provision covering intellectual property licenses—that meant Congress intended for trademark rights to vanish upon rejection.

Meanwhile, the Seventh Circuit (in Sunbeam Products, Inc. v. Chicago American Manufacturing) took the opposite stance. They said, “Hold up. Rejection is just a breach. It doesn’t magically erase the rights the contract already gave the other party.” Imagine leasing a car. If the leasing company breaches the contract, do they show up and tow your car away? Nope, you still get to drive it—but you might have a claim for damages.

Enter the Supreme Court: Dropping the Gavel on the Drama

The Supreme Court sided with Mission, and here’s why: Rejection = breach. Period. Just because Tempnology filed for bankruptcy and rejected the contract doesn’t mean Mission’s trademark rights disappear into the void. The Court emphasized that Section 365(g) is about treating bankruptcy breaches like any other breach outside bankruptcy. If a breach outside bankruptcy doesn’t kill your rights, why should it inside bankruptcy?

The Court also brushed off the argument about trademark monitoring. Sure, it’s important to maintain quality control, but that burden doesn’t mean we rewrite bankruptcy law. If Tempnology didn’t want that responsibility, they shouldn’t have licensed the trademarks in the first place.

This image was created with Leonardo.ai.