Property, intangible

a blog about ownership of intellectual property rights and its licensing

Lack of Control as a Shield

You are undoubtedly familiar with the concept that the lack of control over the quality of the goods and services with which a mark is used can mean that the trademark is abandoned (recursive link alert) by the trademark owner.  But in East West, LLC v. Rahman, the lack of control was instead used to ratify the ownership of the trademark, not destroy it.

Defendant Caribbean Crescent, Inc. sold assets, including the trade name and mark CARIBBEAN CRESCENT, to plaintiff East West. After the transaction the defendant continued to use, or resumed the use of, the mark, triggering the lawsuit.

East West claimed that the mark was fully assigned in the transaction, but Caribbean Crescent claimed that it only licensed the mark to East West. The court agreed with East West, based on the lack of control:

[T]he facts of the instant case do not demonstrate the existence that [sic] a licensing arrangement between the parties. After an assignment, the parties may license-back the mark to enable the assignor- licensee to continue to conduct the same business or provide the same services under the mark. In order to be a valid license, the licensor must adequately control the quality of the goods and services provided by the licensee under the mark. In the instant case, it appears that no such arrangement existed. There has not been evidence put forth that either party exerted control over the quality of the products manufactured and distributed by the other, or that parties even made any overt attempts to do so. Consequently, this Court finds Defendants’ assertion that the transfer of business assets resulted in a license on the trade name to Plaintiff to be lacking a factual basis and without merit.

East West, LLC v. Rahman, Civ. No. 1:11cv1380 (JCC/TCB) (E.D. Va. Sep. 13, 2012).

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