In this month’s edition of MarkIt to Market®, we focus on the third part of our series: “How to Lose a Mark in 3 Ways”. This installments deep dives into the topic of Naked Licensing.
Trademarks are integral tools for brand owners, offering a means to build and effectively communicate brand reputation and its perceived value to the pertaining public. With the association between a mark and owner’s services or products results in impressive goodwill, brand owners can take the opportunity to leverage this reputation. This may be through broadening into new product or service sectors, or even by outsourcing the brand’s current offerings via licensing agreements with third parties.
However, a careful balance needs to be struck; if a brand owner fails to maintain adequate control over the nature and quality of the goods or services being offered under the brand, they run the risk of falling into the trap of naked licensing.
Named for its seeming lack of oversight and control by the mark owner, “naked licensing” is a risky practice that can lead to the unnecessary loss of trademark rights. Such situations may evolve when, for instance, a mark owner does not impose or establish set standards in a licensing agreement, or fails to monitor if these terms of the agreement are being adhered to by the licensee.
With an understanding and adherence to stringent procedures and regulations, brand owners can actively avoid such detrimental outcomes related to naked licensing and hold on to their hard-earned trademarks.
For more detailed analysis on this topic, the original commentary by Sterne, Kessler, Goldstein & Fox P.L.L.C is accessible here.