This is the latest installment in a series of "Legal Geek" articles and audio segments regarding current events and trends where the geek world crosses streams with legal land. An audio version will appear on the Current Geek podcast, available for direct download here.
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This week, we take a look at so-called promiscuous licensors, and what trademark owners can do to protect themselves from losing their IP rights by being labeled as promiscuous.
(Furtado has a record called "Promiscuous" and is also a likely licensor, but not exactly what we are referring to here)
A Michigan court hit the legal news cycle in September for deciding a trademark case based on the well-established doctrine that so-called naked licensing by a trademark owner can destroy the right to protect that trademark. "Naked licensing" is understood to mean the situation where a trademark owner licenses the rights to use the trademark to another party without exerting some control over the quality of goods and the use of the mark by the third party.
This practice is disfavored in trademark law because trademarks are protected for the primary purpose of avoiding consumer confusion, by properly identifying the source of well known trademarked goods. It logically follows that if a company allows others to use the trademark without exerting any real quality control over the use of that mark, then the line blurs for consumers about where the source of goods bearing that trademark is located. That makes the trademark not really identify the true source anymore, which undermines the primary reason we protect trademarks in the first place.
Returning to the Michigan case, a company called Movie Mania was suing to stop a rental service competitor from using the trademark, but the court discovered that Movie Mania had licensed the rights to use that trademark in many agreements since 1996 without any quality control provisions in the license agreements. Thus, these naked licenses ruined any trademark rights Movie Mania had to its own company name, and the competitor won the case and the right to continue using the mark.
This naked licensing was deemed by the court to make Movie Mania a "promiscuous licensor," a cute play on words that helped this case become a bigger news item, but this language may help solidify this often overlooked trademark concept in the public eye. Trademarks are based on some sort of exclusive use, otherwise the mark would not indicate the source of goods for the consumer to avoid confusion, so being "promiscuous" or running around "naked" with your licenses to third parties can clearly undermine that intellectual property.
One of my regular duties in my day job as an attorney is to review publishing and distribution agreements for video and board game designers, as well as other creative types who license the rights to make and sell what is covered by their intellectual property, such as the game in the game design context. Almost every single time, the license granting language for the use of copyrighted and trademarked material contains no real provision for quality control.
This is very bad, as signing such an agreement could wreck one of the client's most important business assets, specifically the trademark rights!
So if you want to learn anything from my past and current clients, learn this: (1) there is no such thing as a form contract, especially when written poorly and one-sided, and (2) there is no reason to sign a license agreement with no quality control provisions for trademarks, as doing so jeopardizes the trademark rights that both parties want to use and exploit.
Line: just like most IP rights, trademark law has some quirks which can lead the uninformed to make bad decisions that could kill assets like trademarks when conducting regular business agreements. Be careful out there, as you don't want to end up being the next "naked and promiscuous" party we hear about in the legal news.
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