San Diego Intellectual Property: How to Avoid Naked Licensing

Trademarks are one of the most valuable assets that a business can own. Trademarks create and help maintain market share as consumers come to experience the trademark — or service mark — as a signal of quality, performance, and solid reputation. To establish a trademark, the owner must create a unique identifier, must use the mark in commerce, must use the mark continually, exclusively, and consistently, and must obtain registration of the mark from the US Patent and Trademark Office.

It is essential to maintain your trademark. Again, the keys are continued and consistent use. Trademarks can be lost if the use is not maintained over time. A “lost” trademark is a mark that is no longer entitled to legal protection. As an example, the mark can become the generic word for a concept which is so commonly used that the word no longer uniquely identifies a single commercial source for the product or service. A couple of examples include “Kleenex” for facial tissues or “Xerox” for photocopiers.

Another way that trademarks can be lost is through what is called “naked licensing.” “Naked licensing” occurs when you allow others to use your San Diego trademark but do not exercise any control over how and when your trademark, logo, slogan, etc., is used. Naked licensing often results in loss of the trademark because allowing others to use your mark without any sort of control generally results in the trademark ceasing to function as a symbol of quality and a unique commercial source. The problem is that the people and businesses using your mark fail to use it consistently, use it exclusively, and/or to use it consistent with trademark law. Often those licensing from you extend the naked licensing to others. Maybe they use it with some other product or service. Maybe they change the logo slightly — maybe change the color or the ratio or the font, etc. In this manner, the mark becomes blurred and stops being a unique identifier. Maybe they overuse it which puts the mark at risk of become generic (like “Kleenex”). In the absence of some sort of licensing agreement, the owner has no ability to enforce the proper use of the mark. Note that a trademark or service mark can be lost whether or not that is what the owner wants or intends. Failing to control the use of your mark by others can result in loss of the mark.

What Should Your Business do?

If you are allowing others to use your mark, you should have them sign some sort of licensing agreement. An experienced San Diego corporate attorney can help craft license agreements to suit your needs. Among the necessary provisions are these:

• Definition of the mark
• Clear statement of use including how the mark must be displayed
• Limitations on use — such as “online only” or “use only for one magazine cover” etc.
• Temporal limitations — license only “good” for “three months”
• Prohibitions or controls on re-licensing to others
• Cease and desist provisions if the mark is being used in violation of the license
• And more

In addition, you must have a monitoring and compliance program in place. Monitoring means checking on some sort of regular basis how others are using your mark. Compliance involves sending letters and taking other actions — up to filing litigation — to stop others from misusing your mark.

Contact San Diego Corporate Law Today

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard’s law practice is focused on corporate, securities, contract, and intellectual property law for small and medium businesses. Mr. Leonard can assist with the formation of your business entity — corporations, LLCs, and other forms — financing through the sale of debt and equity securities, mergers and acquisitions, contract drafting and review including commercial leases, and establishment and licensing of trademarks, copyrights, and trade secrets. Like us on Facebook.

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