In Mission Prod. Holdings v. Tempnology, LLC, 139 S. Ct. 1652 (2019), the United States Supreme Court has ruled that the rejection of an executory trademark license is a breach of contract, but not a termination.
A debtor can assume or reject an executory contract, one where neither party has finished performing, under 11 U.S.C. § 365(a). Under 11 U.S.C. § 365(g) the rejection of an executory contract constitutes a breach.
The (losing) pro-termination policy argument in Tempnology was that termination of an executory contract could aid Chapter 11 debtors in reorganizing by allowing them an exit from burdensome contracts, and having to monitor trademark licenses to make sure the licenses are not being misused by the licensee is burdensome. Further, if the debtor-licensor could terminate by rejection, it might be able to negotiate new license agreements on more favorable terms.
The (winning) anti-termination policy argument in Tempnology is that Section 365(a) says rejection is a breach of contract and does not say it is a termination. Other sections of 11 U.S.C. § 365 point to the result. Section 365(h) provides that rejection of a real property lease does not require the tenant vacate after rejection. Section 365(n) provides that for some types of intellectual property (but not trademarks), if the debtor-licensor rejects the contract, the licensee retains the right to use the license as long as the licensee makes the contractually required payments.
Result: Rejection of an executory contract frees a debtor-licensor from performance under a contract, but a licensee retains the rights to use the license pursuant to the contract.