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Given the nature of trademarks as source identifiers, trademark owners are often required by law to maintain a close connection with the licensee to ensure that the quality standards are maintained so that the consumer is not deceived. Failure to maintain some quality control over the use by the licensee can actually result in a forfeiture or abandonment of trademark rights. Such licenses (where the licensor fails to maintain the proper control over the use by the licensee) are often referred to as “naked licenses”.
In the United States, the standard for what constitutes a naked license was clarified in 2002 in the case of Barcamerica v. Tyfield Imports, Inc. 289 F.3d 589-598 (9th Cir. 2002). The Ninth Circuit held that Barcamerica engaged in naked licensing of its DA VINCI mark for wine and therefore forfeited its rights. Barcamerica had entered into license agreements with a licensee which failed to contain any quality standards. Barcamerica was not involved whatsoever in maintaining or monitoring the quality of the wine produced by its licensee.
Although the Ninth Circuit is known for some progressive (some would say “liberal”, while others would say “crazy”) decisions – this one has continued to serve as a major precedent in the field of trademark licensing. So, in essence, the Ninth Circuit defined the term “naked”, at least in a trademark sense. Perhaps that’s fitting after all.
For more on intellectual property law, see TransLegal’s online course “The Legal English of IP Law”.