Mission Product Holdings, Inc. v. Tempnology LLC (In re Tempnology LLC)

559 B.R. 809
CourtBankruptcy Appellate Panel of the First Circuit
DecidedNovember 18, 2016
DocketBAP NO. NH 15-065; Bankruptcy Case No. 15-11400-JMD
StatusPublished
Cited by7 cases

This text of 559 B.R. 809 (Mission Product Holdings, Inc. v. Tempnology LLC (In re Tempnology LLC)) is published on Counsel Stack Legal Research, covering Bankruptcy Appellate Panel of the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mission Product Holdings, Inc. v. Tempnology LLC (In re Tempnology LLC), 559 B.R. 809 (bap1 2016).

Opinion

Hoffman, U.S. Bankruptcy Appellate Panel Judge.

Mission Product Holdings, Inc. (“Mission”) appeals from the bankruptcy court’s November 12, 2015 order granting the Motion for Determination of Applicability and Scope of Mission Product Holdings, Inc,’s Election Pursuant to 11 U.S.C. § 365(n)(l)(B) (the “365(n) Motion”) filed by Tempnology LLC, n/k/a Old Cold, LLC (the “Debtor”).1 At issue before the bank-ruptcy court was what rights Mission, as a licensee of intellectual property, retained as a result of its election under Bankrupt-cy Code § 365(n)2 when the Debtor reject-ed the executory contract that gave rise to the license. The bankruptcy court ruled that Mission retained its nonexclusive li-cense to use the Debtor’s intellectual prop-erty as set forth in the rejected contract, but not its exclusive product distribution rights or right to use the Debtor’s trade-mark and logo also contained in the con-tract. For the reasons set forth below, we AFFIRM IN PART and REVERSE IN PART.

BACKGROUND

1. Events Preceding Bankruptcy

Prior to a sale of substantially all its assets in 2015, the Debtor was a Ports-mouth, New Hampshire-based material in-novation company that developed chemical-free cooling fabrics for use in consumer products under the brand name “Cool-core.” Mission is in the business of market-ing and distributing innovative sports tech-nologies.

On November 21, 2012, the Debtor and Mission entered into a Co-Marketing and Distribution Agreement (the “Agreement”). In section 1 of the Agreement, entitled “Territory,” the Debtor granted Mission exclusive distribution rights within the United States and “first rights of notice and of refusal in certain other countries” (collectively defined in the Agreement as the “Exclusive Territory”) with respect to an array of the Debtor’s products defined as “Cooling Accessories” and identified on Exhibit A of the Agreement. The Debtor also granted Mission the nonexclusive right to sell Cooling Accessories anywhere else in the world.

[812]*812In section 5 of , the Agreement, entitled “Product Exclusivity,” the Debtor agreed that in the Exclusive Territory it would not license or sell certain specified Cooling Accessories, defined in the Agreement as “Exclusive Cooling Accessories,” to anyone other than Mission during the term of the Agreement.3

In section 6, entitled “Distribution Ex-clusivity and Collaboration,” the Debtor agreed that in the Exclusive Territory it would not sell any Cooling Accessories and certain other products directly or indirectly to any sporting goods and sport specialty retailers.

Section 7 of the Agreement, entitled “Cooperation and Further Assurances,” provided:

[T]hat (i) [the Debtor] shall take no ac-tions to directly or indirectly frustrate its exclusivity obligations hereunder; (ii) [the Debtor] shall fully cooperate with [Mission] to ensure that no third parties take any actions that frustrate the pur-poses of the exclusivity provisions here-in, and (iii) [the Debtor] shall take such actions as are necessary to enforce [the Debtor]’s intellectual property rights and contractual rights against third parties.

In section 15 of the Agreement, entitled “Intellectual Property,” the Debtor grant-ed Mission the following non-exclusive li-cense (the “IP License”):

Excluding those elements of the CC Property consisting of Marks [and] Do-main Names, [the Debtor] hereby grants [Mission] and its agents and con-tractors a non-exclusive, irrevocable, royalty-free, fully paid-up, perpetual, worldwide, fully-transferable license, with the right to sublieense (through multiple tiers), use, reproduce, modify, and create derivative work based on and otherwise freely exploit the CC Property in any manner for the benefit of [Mission], its licensees and other third parties.

The Agreement defined “CC Property” as:

[A]ll products (including without limitation the Cooling Accessories), personal products, inventions, designs, discover-ies, improvements, innovations, ideas, drawings, images, works of authorship, formulas, methods, techniques, concepts, configurations, compositions of matter, packaging, labeling, software applica-tions, databases, computer programs as well as other creative content, methodol-ogies and materials in existence prior to this Agreement (or created outside the scope of this Agreement) or developed or provided by [the Debtor] hereunder and all Intellectual Property Rights with respect to any of the foregoing, exclud-ing any materials provided by [Mission].

(emphasis added). With respect to the Debtor’s trademark and logo which were excluded from the IP License, section 15(d) of the Agreement granted Mission a limited license to use the Debtor’s Cool-core trademark and logo as follows:

During the Term of the Agreement and the Wind-Down Period, [the Debtor] grants to [Mission] a non-exclusive, non-transferable, limited license, which shall expire upon the termination of this Agreement except as necessary to allow either party to exercise its rights during the Wind-Down Period, to use its Cool-core trademark and logo (as well as any other Marks licensed hereunder) for the limited purpose of performing its obli-[813]*813gations hereunder, exercising its rights and promoting the purposes of this Agreement as contemplated herein,.,.

The upshot of the Agreement was that during the term of the Agreement Mission enjoyed the exclusive right to sell the Cooling Accessories to sporting goods re-tailers in the United States and potentially certain other countries, and the exclusive right to sell Exclusive Cooling Accessories to anyone in that same territory. Additionally, Mission received a non-exclusive but perpetual license to exploit the Debtor’s intellectual property and a limited license during the term of the Agreement to ex-ploit the Coolcore brand and logo.

The Agreement had an initial term of two years and was subject to automatic renewal for additional one-year periods. Either party could terminate the Agreement with or without cause by providing written notice. Any event of termination, however, would trigger a two-year wind-down period during which Mission would retain certain rights to purchase, distrib-ute, and sell the Cooling Accessories in accordance with the Agreement.

On June 30, 2014, Mission exercised its rights to terminate the Agreement without cause, triggering the two-year wind-down period. On July 22, 2014, the Debtor issued a notice of termination for cause, asserting that Mission had breached the Agreement. The ensuing dispute resulted in a two-phase arbitration process. On June 10, 2015, the arbitrator rendered a decision in the first phase of the arbitration, deter-mining that the Agreement remained “in full force and effect.” The second phase of the arbitration—as to whether either party had breached the Agreement—did not get very far as the Debtor’s bankruptcy, and accompanying stay, brought the arbitration to a halt.

II. The Bankruptcy Case

On September 1, 2015, the Debtor filed a voluntary' petition for reorganization un-der chapter 11 of the Bankruptcy Code.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
559 B.R. 809, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mission-product-holdings-inc-v-tempnology-llc-in-re-tempnology-llc-bap1-2016.