Federally Registered Trademark May Be Abandoned Based on the Grant of a Single 'Naked' License

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...