- 89 -
Trademark recognition develops from years of adver-
tising, consistent packaging, promotional campaigns,
customer service, and quality control. Depending on
the strength of a trademark, the maintenance of the
desired consumer awareness level generally requires
significant, continuing advertising investment and
product renovation. Trademarks lose substantial value
without adequate investment, management, marketing,
advertising, and sales organization.
Nestle Holdings, Inc. v. Commissioner, T.C. Memo. 1995-441, revd.
and remanded on other grounds 152 F.3d 83 (2d Cir. 1998).
The validity of a trademark license is dependent upon the
licensor’s control over the nature and quality of goods and
services sold under the trademark by the licensee.9 The quality
control requirement has been codified in the Lanham Act,
15 U.S.C. secs. 1055, 1127 (1994), and is judicially recognized.
See Haymaker Sports, Inc. v. Turian, 581 F.2d 257, 261 (C.C.P.A.
1978); Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358,
366-367 (2d Cir. 1959). A purported trademark license without
quality control can result in abandonment of the licensor’s
rights in the mark, a condition that has been also denominated “a
naked license”. Stanfield v. Osborne Indus., Inc., 52 F.3d 867,
871 (10th Cir. 1995); see also 2 McCarthy, McCarthy on Trademarks
and Unfair Competition, sec. 18.48, at 18-75 to 18-76 (4th ed.
1997). The parties’ experts all agree that quality control is
essential to a valid license.
9 See 2 McCarthy, McCarthy on Trademarks and Unfair
Competition, sec. 18:42, at 18-66 (4th ed. 1997).
Page: Previous 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 NextLast modified: May 25, 2011