• Licensing, Naked or Clothed

    by  • September 24, 2008 • trademark

    In the Moose Tracks ice cream post, I mentioned that it didn’t look like a naked license situation because Denali was doing everything necessary to defeat a claim of naked licensing. Nevertheless, there was some suggestion in the survey that consumers didn’t associate the “Moose Tracks” flavor with any particular source, i.e., that they thought “Moose Tracks” is a common flavor name, not a trademark.
    The problem is that the doctrine of “naked licensing” has taken on a life of its own. Federal law is a creature of statute, yet some cases don’t even bother reciting the statutory basis for the naked licensing doctrine. For example, one textbook case explains it this way: “it is well established that where a trademark owner engages in naked licensing, without any control over the quality of goods produced by the licensee, such a practice is inherently deceptive and constitutes abandonment of any rights to the trademark by the licensor.” Barcamerica Intern. USA Trust v. Tyfield Importers, Inc., 289 F.3d 589, 598 (9th Cir. 2002). And this, “A trademark owner, for example, can abandon all trademark rights through uncontrolled or ‘naked’ licensing. ‘If a trademark owner allows licensees to depart from its quality standards, the public will be misled, and the trademark will cease to have utility as an informational device.'” TMT North America, Inc. v. Magic Touch GmbH, 124 F.3d 876, 885 (7th Cir. 1997).
    But it shouldn’t be a question of whether there is a naked license per se; “naked” or “license” do not appear anywhere in the Lanham Act. Rather, it should be a question of statutory abandonment, i.e., whether “any course of conduct of the owner, including acts of omission as well as commission, causes the mark to become the generic name for the goods or services on or in connection with which it is used or otherwise to lose its significance as a mark.” Lanham Act § 45, 15 U.S.C. § 1127. 
    The problem with identifying “naked licensing” as the issue is that we then look only at the formality of the licensing arrangement, rather than the reality of consumer recognition. And the naked licensing doctrine is a very poor proxy for what consumers may or may not be thinking.
    In the Moose Tracks situation, the court said “Denali licenses its registered trademarks and provides the formulas, or recipes, to the licensees. Denali has control over which companies receive licenses . . . . Under its licensing agreements, Denali has control over the quality of the product by requiring the licensees to buy ingredients from authorized vendors. Denali has control over the way its ‘Moose Tracks’ trademark is presented, by requiring that licensees obtain its approval for advertising and carton design.” Thus, apparently no naked licensing. Denali therefore may well be successful in defending itself against a charge of abandonment through naked licensing, but nevertheless the trademark could be sliding into genericism because whether a license is “naked” really isn’t the point.

    © 2008 Pamela Chestek