When Your Licensor Goes Bankrupt: Trademark Licenses, Section 365, and the Mission Product Rule
By Casey Scott McKay ·
For thirty-four years, a trademark licensee whose licensor filed for bankruptcy faced a peculiar and unfair rule: patent and copyright licensees got statutory protection under Section 365(n), and trademark licensees got nothing, because Congress left trademarks out of the Bankruptcy Code definition of intellectual property. This article explains how that gap arose, how the circuits split over it, and how the Supreme Court closed it in Mission Product Holdings v. Tempnology by holding that rejection of an executory contract is a breach rather than a rescission - so a rejected trademark license survives, and the licensee may keep using the mark. It then explains what the decision did not solve: whether a debtor licensor must still police quality, what happens to the mark when it is sold free and clear under Section 363, how the anti-assignment provisions of Section 365(c) treat trademark licenses, and why a licensee with rights it cannot enforce practically may still be in trouble. It closes with the drafting and diligence practices that protect a licensee before anyone files anything.
IP and Technology > IP and IT in Corporate Transactions | Article | Published 16 February 2026 - Updated 9 April 2026 | Casey Scott McKay - marksy.us
Summary. For thirty-four years, a trademark licensee whose licensor filed for bankruptcy faced a peculiar and unfair rule: patent and copyright licensees got statutory protection under Section 365(n), and trademark licensees got nothing, because Congress left trademarks out of the Bankruptcy Code definition of intellectual property. This article explains how that gap arose, how the circuits split over it, and how the Supreme Court closed it in Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. 370 (2019) by holding that rejection of an executory contract is a breach rather than a rescission — so a rejected trademark license survives, and the licensee may keep using the mark. It then explains what the decision did not solve: whether a debtor licensor must still police quality, what happens to the mark when it is sold free and clear under Section 363, how the anti-assignment provisions of Section 365(c) treat trademark licenses, and why a licensee with rights it cannot enforce practically may still be in trouble. It closes with the drafting and diligence practices that protect a licensee before anyone files anything.
Keywords: mission product holdings v tempnology · section 365 rejection · section 365(n) · lubrizol · sunbeam v chicago american · executory contract · countryman test · trademark license bankruptcy · intellectual property definition 101(35A) · quality control after rejection · naked licensing risk · section 363 sale free and clear · anti-assignment 365(c) · hypothetical test catapult · security interest in trademarks · roman cleanser · licensee protections · trademark escrow · bankruptcy remote structure
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