If nurtured properly, trademarks can continue to function indefinitely, bringing continued and increasing value to the owners. There are, however, ways that trademarks can be “lost.” As an example, a trademark can be abandoned through lack of use or can be lost to the general public through the process of genericide. That happens when the trademark becomes the general, commonly known name for a product or service. ZIPPER is a famous example of a trademark lost when the trademark became the common name for a type of fastener.

“Naked” licensing is another way that trademarks can be lost (or, at a minimum, significantly diminished in functionality). Naked licensing happens when the owner of a trademark allows others to use the trademark without sufficient control. Often, naked licensing occurs when there is NO licensing agreement at all. For example, a person or business might just ask a trademark owner: “Hey, can I use your trademark?” If the owner says “yeah” without reducing the agreement to writing, then naked licensing is taking place.

Naked licensing can also occur even where there is a licensing agreement if the trademark owner does not police or control use of the trademark (or trademarks). The most common area where this happens is in franchisor/franchisee relationships. The owners of the trademark (the franchisor) allow the franchisee to use the trademarks (or marks) but do not “police” or otherwise control how the franchisee uses the trademarks. As a few examples, the franchisee may

• Use the trademarks with unauthorized products/services
• Begin using the trademark/s at new unauthorized locations or in unauthorized sales channels
• Change the trademark in small or significant ways — thus diluting the trademark and/or creating new competing trademarks
• Associate the trademark with unsavory or unacceptable things like pornography, crime, etc.
• Fail to use the trademark (or use all of them)

A trademark can be “lost” through naked licensing through several processes. First, failure to police the trademark lessens the power and functionality of the trademark. That is, consumers stop associating the trademark with some particular goods or services. Second, naked licensing opens up a trademark owner to legal challenges from those who want to use a similar-looking or sounding trademark. Essentially, the legal claim is that the trademark has been abandoned through non-use or improper/inconsistent use.

Good licensing agreements and policing are the keys to avoiding naked licensing and the resulting negative consequences. Among other things, a good licensing agreement will do the following:

• Clearly define the trademark or trademarks (with examples included in the agreement)
• Clearly state how the trademarks are to be used and displayed — often, it is useful to also state examples of how the trademarks should NOT be used
• Limit the use of the mark to use on or with certain products and services
• Where appropriate, limit use of the mark to certain places, marketing channels, etc.
• Prohibit alteration of the trademark
• Prohibit the franchisee from using the mark with other trademarks without authorization
• Limit the franchisee from licensing use of the trademark/s without authorization
• Authorize frequent auditing by the franchisor
• Authorize termination of the license for violations
• And more

Contact the IP Licensing Attorneys at Revision Legal

For more information, contact the experienced IP Licensing Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.