This post originally appeared as an article in the July/August 2020 issue of the Journal of Corporate Renewal (JCR), the official publication of the Turnaround Management Association (TMA).
The ability of companies to continue as going concerns has become more challenging than ever. As companies pivot and move forward with product production
and sales, they must consider not only their financial viability but the financial viability of their customers, suppliers, and licensors.
For companies that offer or sell products that are protected under third-party intellectual property rights, preserving a company’s rights to continue to make, use, sell, offer for sale, and import the products that are subject to third-party patent rights is a key consideration. Additionally, the ability to market and distribute products under third-party protected brand names or trademarks may be important.
What happens to a company’s exclusive distribution rights or rights to use licensed trademarks granted under a contract when the licensor becomes a debtor in a case under the U.S. Bankruptcy Code? A company’s ability to protect its contractual rights may very well depend on how it structured its contract. Last year, the U.S. Supreme Court resolved a circuit split regarding this question when it decided Mission Products Holdings, Inc. v. Tempnology, LLC.[i]
This article revisits the Supreme Court’s ruling and suggests strategies distributors and licensees may consider employing at the outset when negotiating exclusive distribution and licensing agreements to protect themselves in the event a grantor or licensor ends up in bankruptcy.
[i] 139 S. Ct. 1652 (2019).