Mission Product v. Tempnology: what license rejection means for a data license

In Mission Product Holdings v. Tempnology (2019) the Supreme Court held that a debtor's rejection of a contract is a breach, not a rescission, so a licensee does not lose rights it already holds merely because the debtor rejected. For a data license, that makes drafting, scope and rights review matter before any filing.

What did Mission Product Holdings v. Tempnology decide?

The Supreme Court decided in Mission Product Holdings, Inc. v. Tempnology, LLC in 2019 that when a debtor rejects an executory contract under the Bankruptcy Code, the rejection operates as a breach of that contract, not as a rescission that cancels it. The practical result in the case was that a trademark licensee did not automatically lose the rights it had been granted when the licensor entered bankruptcy and rejected the license.

Read the opinion itself, from the Supreme Court or a primary legal database, for the exact reasoning and its limits; it concerned a trademark license and did not address data. This page summarises it for readers who wonder what the holding implies when the licensed asset is a set of business records. This is general information, not legal, tax or financial advice. Confirm with your own counsel before acting.

Why does a breach-not-rescission rule matter for records?

Before the decision, some courts treated rejection as cancelling the contract in a way that could strip the counterparty's rights. The rule that rejection is a breach moves the analysis to ordinary contract principles: the estate stops performing, the counterparty can claim damages, and rights already granted are not erased by the label.

For a company that has licensed its records to an AI buyer, the lesson is to separate three things:

what was already granted and delivered under the license;
what the company still has to do, such as further deliveries or support; and
what the buyer may claim if the estate stops performing.

How the pieces fit together

Question	General approach to confirm with counsel
Is the license an executory contract?	Depends on whether both sides still owe material performance; a fully paid, fully delivered, one-time license may look different from an ongoing one
Can the estate reject it?	Subject to the court's approval and the estate's business judgment
Does rejection cancel the buyer's rights?	The Tempnology rule says rejection is a breach, so rights already granted are not cancelled merely by rejecting
What does the buyer get?	A damages claim for any unperformed obligations, typically treated as a pre-filing claim
Are there other statutory protections?	Other provisions may protect licensees of defined intellectual property; whether records qualify is a separate question for counsel

What it implies for an estate deciding what to do

An estate that holds a records license has to ask what value is left in the unperformed parts. If a license was granted, paid for and delivered, little may remain to reject. If delivery is incomplete or the company owes ongoing support, rejection may free the estate of those duties while leaving the buyer's existing rights in place, subject to the contract terms.

Three practical consequences follow.

Draft for the downside. A grant clause that states what is licensed, for how long and for what use, is easier to defend than a vague one.
Finish delivery cleanly. The more that is performed and documented, the less is left to reject. The records custody log helps prove what was delivered.
Know who can sign. Authority, liens and approvals should be settled before the license, not after the filing.

Where does this arise in a chapter 11 or a liquidation?

In a chapter 11 case the debtor ordinarily keeps possession of its assets as debtor in possession and decides which contracts to assume or reject, with court oversight. A plan may also be liquidating. In either setting, a records license the company signed before filing is one of the contracts someone will have to review in the first weeks.

The reviewer will ask who holds copies of the records now, whether the buyer has paid, whether delivery is complete, and whether the license contains obligations that continue, such as updates, audit rights or confidentiality duties. Those answers decide whether rejection would free the estate of anything real.

Questions counsel should ask about any pre-filing license

Is delivery complete, and is there a signed acceptance?
Is payment complete, or is part still owed?
Which obligations continue after delivery, and for how long?
Does the agreement say what happens on insolvency?
Do other statutes protect this type of licensee, and does the data qualify?

How a pre-filing license is usually structured at SourceX

SourceX is the data transaction layer between companies that hold proprietary data and AI labs and data buyers. The company keeps ownership; data is licensed, not sold. Nothing is binding until the company agrees price and terms and signs. Deals are typically exclusive for AI training for an agreed term. The price is one all-in figure with SourceX's fee included, and payment is a single one, typically within about 60 days of invoicing once the buyer selects the data. Delivery follows only an executed agreement and the company's authorization, which is why the delivery record matters if a filing follows.

Read more about what an agreement covers in the data license agreement overview.

Where this fits among related restructuring questions

Out-of-court settlements: a composition agreement with creditors may rely on contingent license proceeds, which raises exactly this performance question.
Sale orders: the Rule 6004(h) stay affects when a sale or assignment takes effect.
Disclosure: the statement of financial affairs asks about books and records that a licensee may hold copies of.
Review: an examiner may ask who has licensed what.
Lenders: see private credit lenders taking the keys for the secured-creditor side.

What to say to the company's counsel

How partner rewards work

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company. The reward is paid only after the buyer pays and SourceX receives its fee; an introduction, meeting or signed agreement alone does not trigger payment, and no reward is guaranteed. It is a share of SourceX's fee and is never deducted from what the company receives.

Lawyers and other licensed professionals should check the rules that apply to them, which vary by state and by role, before accepting any referral reward. See the program terms.

When not to proceed

The company is already in a case and no one with authority has agreed.
The records belong to clients who have not consented.
The data was already licensed for AI training.
Nobody can export the archives.

The company fit checker is a preliminary, non-binding screen, and who qualifies lists the baseline: 50+ full-time employees at peak (contractors excluded), several years of documented operations, rights to license and an authorized sponsor.

Next step

Have counsel review the grant and delivery terms with the company, then register as a partner and make the introduction, or have the authorized sponsor apply at sourcex.si/apply with your referral link.

Step 1Share your linkSend your personal link to a company you know.
Step 2Company appliesThe company applies itself at /apply.
Step 3Buyer selects and paysThe buyer selects and pays for the data and SourceX receives its fee.
Step 4You get your rewardYour share of SourceX fees becomes payable.

Common questions

Did Tempnology decide anything about data licenses?

No. The case concerned a trademark license, and the decision turned on how rejection works under the Bankruptcy Code generally. Counsel applying it to a data license should read the opinion, analyze the specific agreement and consider whether other provisions, such as those protecting licensees of intellectual property, apply to the data in question.

What does rejection mean in plain terms?

Rejection is a debtor's decision, with court approval, not to perform an executory contract going forward. It frees the estate from future performance and leaves the counterparty with a claim for damages. After Tempnology, it does not by itself erase rights the counterparty already received under that contract.

Why does this matter before a company licenses records?

A company that licenses records and later files will have to decide what to do with the license. The buyer's position, the estate's obligations and the value of unperformed terms all depend on how the agreement is written. A clear grant, term and delivery record make that analysis easier for everyone.

Is a SourceX license exclusive?

Deals are typically exclusive for AI training for an agreed term. The company keeps ownership, and data is licensed, not sold. The exact scope, term and rights are set in the executed agreement and are negotiated before anything is binding.

Does a partner need to understand this case?

Not to make an introduction. A partner gives basic fit information and never handles confidential records. Restructuring counsel and fiduciaries who introduce a company should understand how a pre-filing license could be treated, and take their own advice on that question.

Free resources

Earnout scenario calculator — Probability-weighted earnout value and its present value.
Profit margin calculator — Profit and margin across three scenarios.
Client opportunity brief generator — An editable intro email, summary and checklist.
All free tools · MCP resource center

By SourceX Partnerships Team · Published 2026-10-09 · Updated 2026-10-09

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