Calibrating the response to a potential trademark infringement can be a delicate balance worthy of Goldilocks.
Don’t worry, major corporations — including the owners of some of the most well known brands — are also finding it difficult to navigate. No one wants to be called a “bully,” but it can be equally dangerous getting a reputation as a “softy.” Outlined below are five guidelines to help navigate your trademark enforcement strategies:
1. Too Soft – The Consequence of Inadequate Control: Abandonment Through Naked Licensing
The owner of a mark has a duty to police its trademarks. The first place to do so is when entering agreements, allowing others to use your trademarks.
Trademarks are source-indicators and are meant to signify consistency and predictability for consumers. If a trademark owner enters into a license agreement with a third-party to use its marks, it must ensure that the licensees meet necessary standards and quality control measures or risk misleading consumers. Failure to impose these standards upon licensees is deemed a “naked license” and can result in loss of rights in the trademark.
Such was the case with Eva’s Bridal franchises in Chicago when the owners sold a franchise to a third party for $10 and received an annual royalty for the right to use the "Eva's Bridal" name and marks. When the agreement expired, the third party continued to use the mark without paying the royalty. The Federal Court found that the original owner of the trademark had abandoned all rights in the mark by engaging in naked licensing — allowing use of the mark without exercising "reasonable control over the nature and quality of the goods, services, or business on which the mark is used by the licensee."
By failing to require the Eva's Bridal store to be operated in any particular manner, nor retaining any power of supervision over conducting business, the mark was free for use by the third party without payment. This was the case even though the original owner stated that it never doubted the high standards of the third party and it had no reason to superintend any aspects of defendants' business.
Quick Fix: When granting a license allowing others to use your marks, be sure to include adequate quality control measures. Conversely, if you are the licensee of a mark that does not include these measures, you may not need to pay any royalties.