Intellectual Property Law

An Outrageously Good Post on the Freecycle Naked Licensing Case

By Michael Atkins

Outrage is right.

Property, intangible’s Pamela Chestek expresses it over the Ninth Circuit’s treatment of naked licensing in the FreecycleSunnyvale v. The Freecycle Network case that STL discussed last week.

Shows you who I hang out with, but two different friends mentioned Ms. Chestek’s post.

Here’s why. Quoting Ms. Chestek:

“The Ninth Circuit applies a ruthless standard that strips trademark owners of significant value and furthers consumer confusion by punishing companies that, out of naivete, don’t adhere to an exacting legal standard that has little or no relationship to the policy basis for the [naked licensing] doctrine or the goals of the Lanham Act.”

The Fifth Circuit’s a lot more practical — and closer to the doctrine’s statutory origin, Ms. Chestek argues.

In Exxon Corp. v. Oxxford Clothes, 109 F.3d 1070, 1079 (5th Cir. 1997), the Fifth Circuit explained:

“The language of subsection 1127(2) reflects that to prove ‘abandonment’ the alleged infringer must show that, due to acts or omissions of the trademark owner, the incontestable mark has lost ‘its significance as a mark.’ This statutory directive reflects the policy considerations which underlie the naked licensing defense: ‘[i]f a trademark owner allows licensees to depart from his quality standards, the public will be misled, and the trademark will cease to have utility as an informational device … [a] trademark owner who allows this to occur loses his right to use the mark.’ Conversely, if a trademark has not ceased to function as an indicator of origin there is no reason to believe that the public will be misled; under these circumstances, neither the express declaration of Congress’s intent in subsection 1127(2) nor the corollary policy considerations which underlie the doctrine of naked licensing warrant a finding that the trademark owner has forfeited his rights in the mark.”

Ms. Chestek’s right — proof that The Freecycle Network’s mark had lost its significance was thin.

But so was the licensor’s control over its mark.

In the end, I’m not outraged by the result when the The Freecycle Network articulated only the barest of standards for its licensee’s use of its mark and then didn’t even enforce those standards.

Full post as published by Seattle Trademark Lawyer on December 07, 2010 (boomark / email).