Opposition Brief — Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 397 (2018) (No. 17-1657)

No. 17-1657

In Te

Supreme Court of the United States

a

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MISSION PRODUCTS HOLDINGS, INC.,

Petitioner,

v.

TEMPNOLOGY, LLC,

Respondent.

ss

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On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The First Circuit

,

-

BRIEF IN OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI

DANIEL W. SKLAR, Esq. LEE HARRINGTON

NIXON PEABODY, LLP Counsel of Record

900 Elm Street GEORGE SKELLY

Manchester, NH 03101 NIXON PEABODY, LLP

Phone: 603-628-4000 100 Summer Street

dsklar@nixonpeabody.com Boston, MA 02110

Phone: 617-345-1000

lharrington@

nixonpeabody.com

gskelly@nixonpeabody.com

i

QUESTIONS PRESENTED

1. Whether trademarks fall within the ambit of

protection for “intellectual property” rights under sec-

tion 365(n) of the Bankruptcy Code when Congress

made a deliberate choice to exclude trademarks from

the definition of “intellectual property” when it enacted

section 101(35A) of the Bankruptcy Code.

2. Whether exclusive distribution rights granted

under the operative Agreement survive the Debtor’s

rejection of the Agreement by virtue of a non-debtor’s

election under section 365(n) of the Bankruptcy Code.

‘i

CORPORATE DISCLOSURE STATEMENT

Respondent is Tempnology, LLC n/k/a Old Cold

LLC. There are no parent corporations or publicly held

companies owning 10% or more of Respondent’s stock.

TABLE OF CONTENTS

Page

IIIS pi inn ctnscciintncndisacansenianssintpiniceniiiees 1

REASONS FOR DENYING PETITION ............ a

1. The Split of Authority Is Neither Dee»

Fee Be cetcnsecsccesscnccssnsssersesvene 4

2. Congress Acted Purposefully in Enacting

Section 365(n) in the Wake of the Fourth

Circuit’s Lubrizol Decision........................ 7

3. The Present Case is Not an Appropriate

Vehicle for the Court to Establish New

IID i nciicsianndsistitnaistinadindcbdeaiapibaieinndines 14

4. Section 365(n) Does Not Provide a Mecha-

nism to Protect Non-Intellectual Property

CS Eee 17

RR eS tS ES Re el oe 19

iv

TABLE OF AUTHORITIES

Page

FEDERAL CASES

In re Chipwich, Inc., 54 B.R. 427 (Bankr.

SR ie Gt icasnincectiecinecsisticietiaessdnndannnginiianaminedsitasnddenseneeuned 5

Consumer Prod. Safety Comm’n v. GTE Sylva-

eee 8 ae 8

In re Crumbs Bake Shop, Inc., 522 B.R. 766

CE nearer 6

In re Dynamic Tooling Sys., Inc., 349 B.R. 847

I i a setiateainenmaiid 6, 7

Groeneveld Transp. Efficiency, Inc. v. Lubecore

Int'l, Inc., 730 F.3d 494 (6th Cir. 2013)................... 11

Hanover Star Milling Co. v. Metcalf, 240 U.S. 403

SUI iad: Aisndhinhnisinvestiadiinnsepinbaddeanenianiegktaipeaptimniamannedaien 11

In re HQ Global Holdings, Inc., 290 B.R. 507

a Se es ctintiincinsetnmieieeimneeninecinitecsnes 8

Lubrizol Enters., Inc. v. Richmond Metal Finish-

ers, Inc., 756 F.2d 1043 (4th Cir. 1985) ......... 2, 3, 5, 7

NLRB v. Bildisco & Bildisco, 465 U.S. 512. 104

S.Ct. 1188, 79 L.Ed.2d 482 (1984) .................... 10, 13

In re Old Carco LLC, 406 B.R. 180 (Bankr.

He nrenteretceisiuntiandieenienstidanenniinnvnsapminnsinieneninn 7

Raima UK Ltd. v. Centura Software Corp. (In re

Centura Software Corp.), 281 B.R. 660 (Bankr.

Be Ne I ao cersicnctanrensnncenenenenipvamtsatnatnidasemiancsasel 6

Sunbeam Products, Inc. v. Chicago Manufactur-

ing, LLC, 686 F.3d 372 (7th Cir. 2012)............ passim

Vv

TABLE OF AUTHORITIES — Continued

Page

Toibb v. Radloff, 501 U.S. 157 (1991) .............cceeeeeeeeeeee 8

United Drug Co. v. Theodore Rectanus Co., 248

antl REE SE AS LT SRS Mere 11

FEDERAL STATUTES

United States Code Title 11 20..............ccccccecceeeees passim

1

BRIEF IN OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI

Respondent, Tempnology, LLC n/k/a Old Cold

LLC, respectfully submits this response to the petition

for writ of certiorari filed by Petitioner Mission Prod-

ucts Holdings, Inc. in this case.

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INTRODUCTION

This case focuses primarily on limited trademark

license rights that the Petitioner, Mission Products

Holdings, Inc. (“Mission Products” or “Petitioner”), it-

self chose to terminate for business reasons on June

30, 2014, fifteen months before the Respondent, Temp-

nology, LLC (now known as Old Cold LLC) (“Old Cold”)

filed for bankruptcy on September 1, 2015. The unique

contract between the parties provided for a “wind-

down period” following the contract termination by

Mission Products that ended nine months into the

bankruptcy on July 1, 2016, during which Mission

Products made no use of the trademark (as it also had

not done for eighteen months beforehand). In the bank-

ruptcy, Old Cold rejected the contract as permitted un-

der 11 U.S.C. § 365(a), thereby absolving it of further

obligations to police the trademark. In what has be-

come an academic exercise that cannot concretely af-

fect these parties (because Mission Products

voluntarily terminated its own rights long ago), Peti-

tioner’s dogged pursuit of litigation resulted in a first-

ever circuit split between just the First and Seventh

2

Circuits regarding the effects of rejection of a trade-

mark license under Bankruptcy Code section 365.'

Here the First Circuit properly recognized that

trademarks are different from other intellectual prop-

erty rights, and that the Bankruptcy Code’s strong pol-

icy of permitting a debtor to free itself of ongoing

obligations under a contract as embodied in section

365(a) and the right to reject such obligations applies

to the burden of policing trademarks — something to

which the Seventh Circuit had given shorter shrift.

While there is therefore a recent and sole circuit split

on the issue, it is premature for the U.S. Supreme

Court to address this nascent split, and in any event

this is not the right case in which to do so, for several

reasons.

First, the Petition overstates the depth and dura-

tion of the circuit split by attempting to recast the is-

sue as implicating all types of intellectual property

rights including patents. That way, according to the Pe-

tition, a 1985 Fourth Circuit decision on patent rights,

Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc.,

756 F.2d 1043 (4th Cir. 1985), gets swept into the cal-

culus. But not only is Lubrizol a patent case, the issues

it raised were squarely addressed by Congress and put

to bed in 1988 by the enactment of 11 USC.

§ 365(n)(1).

' All references to a section are to sections under title 11 of

the United States Code (the “Bankruptcy Code”) unless otherwise

noted.

3

That brings us to the second, perhaps more funda-

mental, reason that the Court should deny the Peti-

tion: Congressional intent. In passing section 365(n)( 1)

to address issues raised by the decision in Lubrizol,

Congress expressly considered the impact of rejection

under the then-new statute on other intellectual prop-

erty rights such as patents, but deliberately chose not

to include trademarks at that time, given the disparate

and complex issues involving trademarks. Instead, the

legislative history reflects that Congress intended to

leave issues involving trademarks for further develop-

ment and evolution in the courts. At the Court of Ap-

peals level, that exploration has only just begun. In the

three decades since the enactment of section 365(n)( 1),

this issue has only arisen a handful of times and only

twice at the Court of Appeals. Until the issues are fur-

ther fleshed out by o-her Courts of Appeals, it would be

premature for the United States Supreme Court to

step in and terminate the judicial developments that

Congress envisioned.

Third, even assuming a single split of circuit au-

thority warrants the attention of this Court, the pre-

sent case is not the proper vehicle for the Court to

resolve these complex issues. This case is a particu-

larly poor choice for the Supreme Court to forestall ei-

ther bankruptcy court evolution of the law or

appropriate legislative action to try to create new

standards, because key points such as the burdens on

the debtor of the continued policing of the trademark,

the debtor’s balancing of those costs versus any bene-

fits derived from that effort, and the impact of a

4

“stranding” of the trademark were the mark to become

“abandoned,” were not litigated on a developed eviden-

tiary record below. If the Court were to take up this

abstract question on such a thin evidentiary record,

that would likely lead either to new standards based

largely on speculation, or a further remand for fleshing

out the evidence. Far better to await further develop-

ment of the issues involving trademark licenses in

courts as Congress expressly intended or to allow Con-

gress to address the issue as it also contemplated.

Finally, Mission Products also seeks to revive its

separate claim regarding an exclusive distributorship

by re-packaging that claim as though it were a neces-

sary incident of a patent right, an attempt that the

First Circuit rightly rejected as unsupportable. That

argument does not, itself, present any circuit conflict

or other ground for this Court’s special review on cer-

tiorari.

For all these reasons, Old Cold urges the Court to

deny the Petition and allow these issues to be resolved

by the bankruptcy courts on a case-by-case basis or

Congress on a legislative level.

_¢«

REASONS FOR DENYING PETITION

1. The Split of Authority Is Neither Deep Nor

Long-Standing.

For the first time in thirty years — after Congress

passed section 365(n) in response to a Fourth Circuit

5

patent case in Lubrizol, a new circuit conflict has

arisen regarding the impact on trademarks of rejection

of a contract in bankruptcy. That nascent conflict has

yet to be fleshed out in other circuits. The Petition and

amicus briefs inflate the scope of the present case by

suggesting that it has an impact on all intellectual

property in bankruptcy. On the contrary, that wider

landscape was resolved by Congress when it enacted

section 365(n), from which it carefully carved out

trademarks for further evolution in the courts. That

evolution has largely just begun after thirty years,

with the First Circuit decision here.

As the Seventh Circuit acknowledged in Sunbeam

Products, Inc. v. Chicago Manufacturing, LLC, 686 F.3d

372 (7th Cir. 2012), the split of authority does not date

back thirty-plus years to Lubrizol, nor is it wide-

ranging:

We need to determine whether Lubrizol cor-

rectly understood § 365(g), which specifies the

consequences of a rejection under § 365(a). No

other court of appeals has agreed with Lubri-

zol — or for that matter disagreed with it. Id.,

at 377 (emphasis supplied).

Now the First Circuit has also weighed in, but no

other circuit court has addressed the issue head on.

The bankruptcy courts that have done so have acted as

intended by Congress in making equitable rulings

based on the cases before them. See, e.g., In re Chip-

wich, Inc., 54 B.R. 427, 431 (Bankr. S.D.N_Y. 1985)

(stating that rejection of licenses by licensor deprives

licensee of right to use trademark but licensee has

6

allowable claim for damages for breach of contract). /n

re Dynamic Tooling Sys., Inc., 349 B.R. 847, 856 (Bankr.

D. Kan. 2006). Raima UK Ltd. v. Centura Software

Corp. (In re Centura Software Corp.), 281 B.R. 660, 670

(Bankr. N.D. Cal. 2002); but see In re Crumbs Bake

Shop, Inc. , 522 B.R. 766 (Bankr. D.N.J. 2014). What the

Petitioner and amici characterize as “confusion” en-

gendered by this process is nothing more than these

various courts making rulings on the facts before

them. The parties further urge this Court to provide

“equitable treatment” of trademarks as comporting

with Congressional intent and the fundamental prin-

ciples of bankruptcy law. But that is exactly what has

Trademarks are deeply different from other forms

of intellectual property subject to the application of

section 365(n), because the value inheres in conveying

a message of continued monitoring and quality contro!

by the originator (and not just the licensees). How that

plays out in bankruptcy, when the debtor is unwilling

or unable to perform that role, is a conundrum that

Congress recognized when it carved out trademarks

for further study and development. This intent is

something the Seventh Circuit gave short shrift to, and

the First Circuit is the first court of appeals to fully

recognize. At a minimum the issue should be further

developed in the bankruptcy and appellate courts be-

fore this Court considers the issue.

7

2. Congress Acted Purposefully in Enacting

Section 365(n) in the Wake of the Fourth

Circuit’s Lubrizol Decision.

In the aftermath of Lubrizol, Congress enacted a

careful balancing of rights and obligations of debtors

and their “intellectual property” licensees as “intellec-

tual property” is defined in the Bankruptcy Code. Con-

gress granted licensees an election to continue to use

licensed patents and copyrights while affording debtor

licensors the right to continue to collect royalties not-

withstanding a licensees’ damages from breach of con-

tract.

While the Petitioner and amici attempt to expand

the impact of the First Circuit’s holding to subsume not

merely trademarks but all forms of intellectual prop-

erty rights, those attempts misstate the relevant law

and the First Circuit’s holding. Contrary to these posi-

tions, the present case does not implicate broader is-

sues that create “uncertainty over significant

commercial transactions that are central to our na-

tion’s system for encouraging and rewarding innova-

tion.”

The plain language of section 365(n) excludes

trademarks because of the definition of intellectual

property at 11 U.S.C. § 101(35A). The statute is clear

and does not include trademarks. See, e.g., In re Old

Carco LLC, 406 B.R. 180, 211 (Bankr. S.D.N_Y. 2009)

(“Trademarks are not ‘intellectual property’ under the

Bankruptcy Code.”); In re Dynamic Tooling Sys., Inc.,

349 BR. 847, 856 (Bankr D. Kan. 2006)

8

(“|T|rademarks and service marks |are| not protected

by § 365(n) at all because trademarks are not ‘intellec-

tual property’ as that term is defined in the Code. . . .”);

In re HQ Glebal Holdings, Inc., 290 B.R. 507, 513

(Bankr. D. Del. 2003) (excluding trade names, trade-

marks, and other proprietary marks from the defini-

tion of “intellectual property”).

Courts should consider legislative history to re-

solve statutory ambiguity if the language of a statute

is not clear, but when a statute is clear there is no need

to do so. Toibb v. Radloff, 501 U.S. 157, 162 (1991). A

court may only hold contrary to an unambiguous stat-

ute when there is clearly expressed legislative intent

that contradicts the plain language of the statute. Con-

sumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447

U.S. 102, 108 (1980). While the statute is clear and un-

ambiguous and therefore this Court need not resort to

a review of legislative history, the legislative history of

section 365(n) is instructive on this narrow issue. That

history shows a clear intention that Congress would

allow bankruptcy courts to develop law for the “equita-

ble treatment” of trademark licenses in bankruptcy

cases to inform, as necessary, further Congressional ac-

tion should Congress opt to revisit the issue at a later

date.

One of the amici, the International Trademark As-

sociation (“INTA”), itself has proposed that the treat-

ment of trademarks under section 365(n) is best

addressed by Congressional amendment. In 2012,

INTA drafted Board Resolutions sponsored by its U.S.

Legislation Subcommittee that proposed explicitly

9

that Congress amend section 365(n) to include trade-

mark licenses within its post-rejection protection for

licensees. The INTA resolution proposed a continuing

obligation on a debtor-licensor to comply with any

monitoring and quality control obligations under such

license. Congress can achieve through legislative ac-

tion what this Court cannot — amend section 365(n) to

uniformly protect the rights of both debtors and licen-

sees to trademark licenses.

Petitioner and amici each pairot the language in

Sunbeam that “an omission is juet an omission” 686

F.3d at 376 when urging the Court to reach a uniform

judicial resolution of the post-rejection rights under

section 365(n). But that position is in direct conflict

with the legislative history cited in the briefs submit-

ted to the Court that make it clear that the “omission”

of trademarks was thoughtful and reflected Congres-

sional intent that bankruptcy courts develop the law.

In this case, after reviewing the subject distribu-

tion agreement and the plain meaning of section 365,

the bankruptcy court, the bankruptcy appellate panel

and the First Circuit, correctly determined, that Peti-

tioner retained all of the intellectual property rights

under the agreement that were expressly protected by

section 365(n) — i.e., rights to exploit patents and cop-

yrights — but that any rights in trademarks that Peti-

tioner might once have exploited under the agreement,

were not protected under section 365(n).

The issue then becomes, what, if any, rights does a

licensee in Petitioner's position retain post-rejection of

10

its trademark license by a debtor-licensor. Petitioner

urges the Court to adopt the reasoning in Sunbeam

that a licensee retains whatever rights it has under the

controlling agreement but the debtor is relieved of the

duty of specific performance post-rejection. The First

Circuit recognized that, given the fundamental public-

facing nature and quality control that define the

maintenance and exploitation of trademarks, imposing

this on-going burden on a debtor in bankruptcy is at

odds with the essence of bankruptcy’s reorganization

principles. At the heart of the First Circuit’s ruling is

a fundamental understanding that the purpose of re-

jection under section 365 is to “release the debtor’s es-

tate from burdensome obligations that can impede a

successful reorganization.” See NLRB v. Bildisco &

Bildisco, 465 U.S. 513, 528, 104 S.Ct. 1188, 79 L.Ed.2d

482 (1984). Determination of the scope and cost of

these on-going performance obligations on a debtor im-

pose delays and costs on a bankruptcy case that will be

difficult to measure and may likely undermine effec-

tive reorganization or sales under the Bankruptcy

Code.

Trademarks play no discernible role in encourag-

ing or rewarding innovation in the same way that, for

example, patents do. Trademarks are fundamentally

different than patents, copyrights and trade secrets.

Trademarks protect vastly different works than copy-

rights and patents. The distinction between trade-

marks and other types of intellectual property

originates from theoretical, foundational reasons for

protecting each type of intellectual property. Patents

1]

and copyrights protect authors and inventors in order

to facilitate innovation. Groeneveld Transp. Efficiency,

Inc. v. Lubecore Int'l, Inc., 730 F.3d 494, 512 (6th Cir.

2013). Alternatively, trademarks focus on marketplace

integrity and protect consumers who rely upon trade-

marks when purchasing goods and services. See 15

U.S.C. § 1127 (2012).

The United States Supreme Court specified that

trademarks “identify the origin or ownership of the ar-

ticle to which it is affixed.” Hanover Star Milling Co. v.

Metcalf, 240 U.S. 403, 412 (1916). Trademarks protect

the integrity of the marketplace with no regard for the

creators of intellectual property. Groeneveld, 730 F.3d

at 512. Trademarks protect the goodwill of a particular

trader from imitators passing another product or ser-

vice off as the product protected by the trademark.

United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90,

97 (1918). Congress did not intend for trademarks to

promote creativity because a trademark’s protection

lasts perpetually, whereas copyrights and patents cre-

ate a monopoly limited to a specific number of years.

Id.

A trademark brands a product to give that product

the imprimatur of legitimacy and consistency of qual-

ity in the market place. Trademarks are not, however,

goods sold into the market as urged by the Petitioner

and amici. Trademarks are not property rights like pa-

tents or copyrights, that is, property rights created by

federal law held in the hands of and exploited by the

licensee. Instead, trademarks are intended to provide

consumer protection — with unitary ownership held by

12

the licensor to ensure quality control in the market of

the branded product.

Further, in enacting section 365(n), Congress

acted consistently with the manner in which it has ad-

dressed numerous other executory contract rights —

creating special sets of rights unique to bankruptcy

that carefully balance the debtor’s right to reorganize

against the rights of non-debtor contract counterpar-

ties. For example, non-debtor tenants under real estate

leases are afforded statutory rights to use the lease-

hold, while losing rights to compel debtors to maintain

or improve the property. See § 365(h)(1)(A). Non-debtor

tenants in shopping center leases are likewise entitled

to retain the leasehold, but are also entitled to enforce

radius and tenant mix restrictions. See § 365(h)(1)(C).

Non-debtor buyers of timeshares are permitted by

statute to retain their right to use the timeshare. See

§ 365(h)(2)A). Non-debtor buyers of real property are

afforded rights of specific performance on contract re-

jection and, in addition, are afforded a lien on the prop-

erty to secure any prepaid deposits if the buyer elects

to treat the lease as terminated. See § 365(i)(1) and

§ 365(j). Non-debtor parties to collective bargaining

agreements are afforded special rights and a higher le-

gal standard for rejection. See § 1113. In enacting

these provisions, Congress understood how to balance

the respective rights and obligations of parties to exec-

utory contracts upon rejection. Section 365(n) is fur-

ther evidence of Congress’ capacity to strike that

balance.

13

It is well settled that, after rejecting a contract, a

debtor is not subject to an order of specific perfor-

mance. See NLRB v. Bildisco & Bildisco, 465 U.S. 513,

531, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984). Should the

Court grant the Petition and thereafter find in favor of

the Petitioner, the Court will disturb settled rights

granted by Congress respecting a debtor's right to re-

ject executory contracts. The result of such a finding,

permitting non-debtor parties to retain rights of spe-

cific performance post-rejection, renders section 365(n)

superfluous. Moreover, congressionally crafted bene-

fits for debtors, including a debtor’s ability to continue

to collect royalties from licensees under section 365(n),

would be illusory. Indeed, had Congress intended that

result, it could have excluded all intellectual property

licenses from the definition of executory contracts

eliminating a debtor’s option of rejecting such con-

tracts. This is not the case. If the Petitioner is correct,

section 365 could be reduced to a single provision: no

matter the substance or subject of an executory

contract for exploitation of intellectual property, upon

rejection, the non-debtor party has a claim for pre-

petition breach, thereafter retains whatever rights it

has under the contract and, if necessary, can compel

specific performance by the debtor. The logic leads to

an absurd result directly at odds with the fundamental!

rehabilitative nature of reorganization under the

Bankruptcy Code and the fundamental purpose of sec-

tion 365.

The unique characteristics of trademarks support

a holding that licensees cannot continue to use

14

trademarks after a debtor rejects a trademark license

under section 365 because continued use necessarily

imposes costs and burdens on the debtor licensor.

3. The Present Case is Not an Appropriate Ve-

hicle for the Court to Establish New Stand-

ards.

Even assuming a split of authority that warrants

the attention of this Court, the present case is not the

proper vehicle for the Court to use to resolve such a

split. This case is a particularly poor choice for the Su-

preme Court to (prematurely) forestall either the

bankruptcy court evolution of the law or appropriate

legislative action to try to create new standards here,

because key points regarding the burdens on the

debtor of the continued policing of the trademark, the

debtor’s balancing of those costs versus any benefits

derived from that effort, the impact of a “stranding” of

the trademark were the mark to become “abandoned,”

was not litigated on a developed evidentiary record be-

low. If the Court were to take up this abstract question

on such a thin evidentiary record, that would likely

lead either to new standards based largely on specula-

tion, or a further remand for fleshing out the evidence.

Far better to await further developments in courts as

Congress expressly stated it intended or to allow Con-

gress to revisit the issue as it also contemplated.

While the legal rulings of the Seventh and First

Circuits appear irreconcilable, it is important to note

that the facts of Sunbeam and the present matter are

15

significantly different. Sunbeam involved a short term

transitional license for sale of a finished product. The

quality control issues in that case were minimal be-

cause the term of the license was so short. The present

matter, on the other hand, involved a two-year license

that the courts below found was part of a complex joint

venture/joint marketing and distribution arrange-

ment. The complexity of agreement between the par-

ties would have required post-rejection interaction

between Old Cold and the Petitioner to ensure mainte-

nance of quality control and was a major factor in the

First Circuit’s decision to diverge from Sunbeam.

Further complicating the Court’s resolution of the

nascent circuit split, this case involves a license that

has already expired by its own terms. On or about June

30, 2014 Mission Products purported to exercise its

right to terminate the agreement without cause, which

triggered a two-year wind down period. On July 22,

2014, citing certain breaches of the agreement by Mis-

sion Products, Old Cold issued its own notice of termi-

nation to Mission Products. The parties, pursuant to

the agreement, then commenced a two-part arbitration

process to resolve their cross claims of breach of con-

tract against one another.

At the end of the first phase of the arbitration pro-

cess, the arbitrator issued a ruling that, among other

things, held that the agreement would terminate at the

end of the wind-down period, or by June 30, 2016.

Therefore, the agreement terminated by its own terms

more than two years ago independent of Old Cold’s re-

jection of the agreement in its bankruptcy case.

16

If the Court grants certiorari and thereafter rules

for Petitioner, the resulting rule in another case, for

example, involving franchised trademarks or a situa-

tion where a court is confronted with multiple non-

exclusive licensees, will likely lead to unintended

consequences. These consequences may include wide-

spread consumer confusion regarding the licensed

brands and potential de facto abandonment of trade-

marks due to the loss of unitary ownership.

Further, Mission Products did not exploit the sub-

ject trademarks in the two-year period leading up to

the termination of the agreement, nor had it indicated

that it had any intention or desire to do so. Mission

Products neither ordered nor sold any of the subject

goods under the agreement for more than two years

leading up to the termination of the agreement in June

2016. In a letter dated April 16, 2015 that is part of the

record below, Mission Products advised Old Cold that

it would not order any products from Old Cold during

2015 and 2016. The statement was made manifest by

Mission Products’ conduct thereafter. In 2014, Old

Cold received approximately $5 million in revenues

from Appellant. In the calendar years 2015 and 2016,

those revenues were $0.00 through the date of termi-

nation. Accordingly, Mission Products’ claims arising

from alleged breaches of the agreement, present

unique and complex issues because it is not certain

how Mission Products could prove any damages. That

critical fact is distinct from Sunbeam in which the non-

debtor licensee was actively exploiting the subject

trademark in the marketplace.

17

Moreover, the record is devoid of any evidence of

the costs and burdens that post-rejection maintenance

of the trademark would have imposed on Old Cold dur-

ing the two-year wind down period. Additionally, the

underlying agreement is at best opaque in spelling out

the intellectual property rights of the parties and, to

some extent, the dispute that is now before the Court

is predicated on the uncertainty of rights set forth in

the agreement. In short, this is not a case that should

be the platform for announcing new standards for the

rights of a trademark licensee post-rejection.

4. Section 365(n) Does Not Provide a Mecha-

nism to Protect Non-Intellectual Property

Distribution Rights.

Petitioner also urges the Court to expand the

scope of section 365(n) to include its exclusive distribu-

tion rights under contract. As the First Circuit cor-

rectly held, Petitioner’s position requires a tortured

reading of section 365(n)(1) that comports with neither

the clear language of the section nor the legislative in-

tent in protecting a narrowly defined subset of rights

for non-debtor licensees post-rejection.

There is no need for the Court to consider Peti-

tioner’s expanded, and unsupported reading of section

365(n) with respect to its mere distribution rights. The

First Circuit correctly found that Petitioner's exclusive

right to distribute certain products in a limited geo-

graphic territory did not rise to the level of a grant of

18

a license in intellectual property that would enjoy post-

rejection protection under section 365(n).

While Petitioner urged the First Circuit to read

the parenthetical in section 365(n) “any exclusivity

provision of such contract” to mean any “exclusivity

provision” in the entire agreement and not simply a

provision that grants exclusive use of a pertinent in-

tellectual property right, the First Circuit did not em-

brace such an expansive reading. Despite making this

argument in four different forums, the Petitioner is un-

able to provide any support for such an expansive read-

ing. Nor do the amici in their briefs. Somewhat

ironically, this issue was the only one on which the BAP

ruled against the Petitioner. It remains unclear why

Petitioner continued to pursue further appellate relief

after receiving a favorable ruling from the BAP on the

central section 365(n) issue.

Here, the First Circuit focused on the intention of

section 365(a) and the rights retained by a licensee of

intellectual property and found that the parenthetical

is intended to make clear that those rights “to such in-

tellectual property” include any exclusivity attributes

of those rights, nothing more.

“a

aa

19

CONCLUSION

For all of the foregoing reasons, the Court should

deny the petition for a writ of certiorari.

Dated: September 7, 2018

Respectfully submitted,

DANIEL W. SKLAR, Esa. L&E HARRINGTON

Nixon Peasopy, LLP Counsel of Record

900 Elm Street GrORGE SKELLY

Manchester, NH 03101 Nixon Peasopy, LLP

Phone: 603-628-4000 100 Summer Street

dsklar@nixonpeabody.com Boston, MA 02110

Phone: 617-345-1000

lharrington@

nixonpeabody.com

gskelly@nixonpeabody.com