The U.S. Court of Appeals for the Ninth Circuit has held that
an incontestable, federally registered trademark may be abandoned and cancelled
based on the owner's grant of a single "naked license." Barcamerica
Int'l USA Trust v. Tyfield Importers, Inc., 2002 U.S. App. LEXIS 8657 (9th
Cir. May 6, 2002).
The plaintiff owned an incontestable federal trademark
registration for the mark LEONARDO DA VINCI for wine. The defendant used the
same mark, LEONARDO DA VINCI, on the same goods, wine. The plaintiff sued for
trademark infringement and the defendant counterclaimed for cancellation of the
plaintiff's federal trademark registration on the grounds of abandonment.
The district court awarded summary judgment in favor of the
defendant, noting that the plaintiff had licensed its mark to a third party,
and the license agreement did not contain a quality control provision, i.e.,
a provision that gave the plaintiff the right to control the quality of the
wine sold under the mark. Further, the plaintiff had not, in fact, exercised
quality control over the licensee's wine sold under the mark. Accordingly, the
district court held that the plaintiff had abandoned its mark and ordered the
cancellation of the plaintiff's federal registration.
The Ninth Circuit affirmed, explaining that "a trademark
owner may grant a license and remain protected provided quality control of the
goods and services sold under the trademark by the licensee is
maintained." The court also explained that "'uncontrolled' or 'naked' licensing
may result in the trademark ceasing to function as a symbol of quality and
controlled source." Because the plaintiff had entered into a license
agreement that did not include a quality control provision and had failed to
exercise quality control, in fact, over the quality of the wine sold by the
licensee under the mark, the Court held that plaintiff had abandoned...