Litigation

Trademark Licensors: Protect Your Trademark, Become Strictly Liable

By Bruce Nye

CBL presently subscribes to 57 blogs.  More than half of them are law related (although CBL would not ever want to miss an installment of such non-law blogs as ZeroToSixtyInOneYear and PitchersAnd Poets).  But CBL subscribes to very few official law firm blogs -- law blogs that are clearly designed by somebody's marketing consultant and have gone through all the editing, screening, conflict-checknig  and sanitizing typically necessary to get them through big-firms' scrutiny (while at the same time ensuring boredom for the reader). 

But there are exceptions to every rule, and one of them is the IP Law Blog of Sacramento's Weintraub Genshlea Chediak Law Corporation.  Even though IP Law Blog is an official law firm blog, the posts are well-written and instructive in a field where CBL doesn't generally toil, and they are often interesting. 

A pretty good example was this one on a doctrine CBL had never heard of:  the doctrine of Naked Licensing.  As Weintraub's Jeffrey Peitsch observes, "Naked licensing is not as fun as the name suggests."  It refers, for example, to the granting of a license for a product without taking steps to control the licensee's manufacturing quality.  As Peitsch suggests, naked licensing occurs if the World Champion San Francisco Giants Baseball Club (I still love typing that) licenses its logo to the Joe Schmoe Manufacturing Company without regulating Schmoe's design and manufacturing processes, and Schmoe uses the license to manufacture and sell a bunch of substandard junk.  The Ninth Circuit has held that this would be a deceptive business practice on the part of the WCSFG's, and could result in their losing their trademark protection.

But there's an interesting crossroads here between IP and product liability law.  In California, as in most states, manufacturers and distributors are strictly liable for injuries caused by defective products.  But who else might be liable?  A licensor?  The answer is "maybe."  Under Kasel v. Remington Arms Co. (1972) 24 Cal.App.3d 711, a trademark llicensor may be held strictly liable for injuries caused by the licensed product, or not, depending on the extent to which the licensor exerts control over the quality of the product.  And dictum in Bay Summit Community Assn. v. Shell Oil Co. (1996) 51 Cal. App. 4th 762 rather strongly indicates the same:

[W]here a licensor maintains significant involvement in the distribution or manufacturing process, the policies underlying the doctrine are implicated, including that the defendant is in a position to deter unsafe products and to spread the risk of loss.

So it looks as though the Naked Licensing doctrine and the doctrine of strict liability work together like this:  if the WCSFG's let any old licensee use their trademark without regulating quality, they face loss of the trademark.  If they regulate the quality, they face strict product liability for any product defect.  And that goes for licensors who don't play baseball, as well.

Full post as published by CalBizLit on January 12, 2011 (boomark / email).