2022 Licensing Update: Trademark Licensing

Finnegan attorneys Brett Heavner, Yinfei Wu, and Jessica Hannah authored chapter 2 of the Trademark Licensing Update. The chapter takes a critical look at issues that affect the use and maintenance of trademarks in a licensing context. Section 2.02 provides the reader with guidance on interpreting the terms and scope of a licensing agreement. Examined are cases from the Federal Circuit. Section 2.03 describes how, under the Lanham Act, a licensee’s use inures to the benefit of the licensor-owner of the mark if the licensor-owner exercises reasonable control over the nature and quality of the licensee’s goods or services. The licensor’s ability to derive benefit from the licensee’s use of the mark is also dependent, however, on the licensee’s use of the mark in commerce. A 2021 Southern District of New York case provides meaningful illustration. Section 2.04 takes on the issue of quality control as a fundamental element in all trademark licensing agreements. Controlling the quality of the licensed products ensures that the trademark owner is the “source” of those products and prevents the public from being misled into thinking it will receive a product of similar quality and character from a licensee as it would receive from the licensor, if in fact there is no such similarity. In the absence of quality control, the trademark may cease to function as a symbol of quality and controlled source. Insufficient quality control by a trademark owner, also called “naked licensing,” will lead to the abandonment of the licensed mark. Section 2.05 tackles the issue of terminating implied licenses. Standing is a constantly litigated question and Section 2.06 examines the topic. Courts generally look at the plain language of the agreement to determine whether the right to sue or enforce the trademark has been reserved to one party or another. The Lanham Act may restrict licensee standing to sue.

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