South Carolina Intellectual Property Litigation

Intellectual Property & Litigation SC

Beware of the FaceBook Support Group Naked License

Posted in General, Injunctions, Licensing, Policy, Trademarks

Most people seeing or hearing, “naked license,” for the first time will wonder what does nudity have to do with intellectual property or business? Well, the concept that this term / phrase denotes is likely one of the most basic in IP, and it is limited to trademarks?

A quick Google search for “naked” and images shows that Americans are fascinated with the term, naked. For example, have you ever really considered …

2016-01-13__golf naked or 2016-01-13__fish naked ??

The latter involves hooks and line and is dangerous enough fully clothed.

So what in the heck is a “naked license”?

A naked license occurs when a trademark or servicemark owner fails to police their brand. Yes, it is that simple. The license is bare. A naked license can arise when a trademark owner grants a written, de facto or verbal license to another party with no provisions allowing / requiring the trademark owner to ensure the quality of the goods sold or services rendered.

A naked license can also occur, arguably, when there are unenforced quality control provisions in place, or when a trademark owner benefits by the third-party use and acquiesces without any controls. The famed treatise, McCarthy on Trademarks, describes the naked licensing (paraphrased to shorten, italics emphasis added) as follows:

Uncontrolled licensing whereby licensee places the mark on any quality of goods [causing] mark to lose significance. Such uncontrolled licensee use raises a grave danger the public will be deceived.

While the concept prohibiting uncontrolled licensing is rooted in the Lanham Act at 15 U.S.C. 1055, circa 1946, the term naked license appears to have first been used in caselaw in 1959 in the Dawn Donut case, which is better known for its holding limiting trademark injunctions. In Dawn, the Second Circuit cited to a 1948 legal battle between chemical powerhouses DuPont and Celanese, and stated:

But even in the DuPont case the court was careful to point out that naked licensing, viz. the grant of licenses without the retention of control, was invalid. (bold emphasis added).

For those still curious, the issue of abandonment by naked licensing was remanded to the district court. The Dawn Donut court stated, “I would direct the district court to order the cancellation of plaintiff’s registrations if it should find that the plaintiff did not adequately police the operations of its licensees.”

Quality Control (“QC”) and Brand Power

A trademark owner must exercise Quality Control over its own services and those of its licensees. Why? Well, for example, to ensure their customers that a Ramada Inn in Butte, Montana maintains the same standards or service, cleanliness, etc., as another Ramada in Spokane, Raleigh, Savannah, Lubbock, Memphis or Santa Fe. Ok, so maybe expectations are not so high for a Ramada anymore. So change the example …

What if you have a reservation for the weekend at a Westin, Hilton or a Four Seasons? In the dining world for traveling workers, consider an Applebee’s restaurant. Ok, another brand arguably on the decline, maybe an Outback Steakhouse, or a Bonefish Grill? If you are a weary Interstate traveler … Cracker Barrel? You get the picture. You expect them all to be pretty similar to each other, and the Lanham Act says you have a right to that expectation.

For a recent S.C. District Court case on naked licensing, The Trademark Blog reports on Goliath Nike’s recent fueling the fire with allegations of a naked license by FUEL for apparel (by David) via use of co-existence agreements with other FUEL mark users. The district court’s order rejecting Nike’s naked licensing claim and discussing reverse dilution, a topic for another day, is available here.

As a consumer, when out of town, do you not gravitate to brands that you know, absent a strong recommendation to dine or stay somewhere else? Be honest, you know you do, unless you just have a thing for food poisoning. That is an example of the power of a brand. The policy behind the required QC helps consumers minimize their risks of a bad experience, and avoids deception of the public.

FaceBook Support Groups?

So what does this have to do with FaceBook support groups? Think for a moment, use your imagination, it is not really a hard question. Better yet, let’s look at the example that prompted my investigation recently.

Whole30® is a New York Times bestselling book seeking a trademark registration in Class 16 in the field of diet and nutrition. Whole30 also owns a registered servicemark in Class 44 for dietary and nutritional guidance; [and] providing a website featuring information about health, wellness and nutrition. The brand manifests itself for me initially by word of mouth (my lovely wife), then as the book (that I bought for her). However, as noted above, it also includes a web-site, and its enthusiastic readers then start their own FaceBook Support Groups (we will not even get into The Twitter handles).

You mean to tell me that Whole30® is responsible for how its customers spread the word about their program? Well, the best way to answer that is to refer you to to the Whole30 FaceBook Support Group “Guide” page. So what does Whole30® require of its readers / support group promoters:

  • use a name that “distinguishes” your group from “official” Whole30® sites; and

That’s pretty much it, the rest of their guidelines are just to “help you help them.” Below is their warning / trademark statement from the Guide page:

Tip: Please respect our registered trademark, and make sure your group name clearly identifies you as an independently-run community. Group names like “Whole30 Ireland” or “Whole30 Support” make it seem like you are a group run by Whole30 HQ, and creates confusion in the marketplace. We will ask you to change your group name if we find there is such confusion.

Take Aways

If you have a brand that is subject to being hi-jacked by your well-meaning supporters, and possibly watered-down by them despite their good intentions, you’d likely do well to copy some of these guidelines from Whole30®, very politely enforce them, and keep a record of it. Probably not a bad idea to encourage the support groups to link back to your official page either ;-).

If you are an enthusiastic supporter of a brand and if you run afoul of their guidelines, you may find yourself saying, “sorry, dude,” when they send you a cease-and-desist requiring you to not-so-much change, but “distinguish” your name. Pizza, btw, is not only not allowed in Mr. Hand’s class, but it is also not allowed on Whole30®, but you could pick the sausage off of Spicoli’s pizza, if the label says it has was grass-fed, has no sugar, etc. (p. 68). Actually the grass-fed comment is not a Whole30® requirement, but it is a good / bad / innocent example of how a support group or Twitter user could change the brand’s true message.

By the Way, btw …

The Whole30® book bought for my wife is now in good use (by me and our daughter). After being pretty overwhelmed by all of the information at first, my daughter and I give it two-thumbs up. She not only now will eat what I cook, she is cooking, planning, learning and having fun with me, which is pretty darn awesome.


Are Employee Non-Competes Good Policy? Many ways to Skin a Cat, Trade Secrets, Non-Solicitations, Confidential Information / NDA

Posted in Confidential Information, Injunctions, Jury Issues / Trial, Non-Disclosure Agreements, Policy, Trade Secrets

At least two states, Michigan this year and Massachusetts in 2014, have proposed legislation to curtail / eliminate the rights of parties (i.e., employers) with respect to non-compete agreements. The Michigan proposal would make “void” any non-compete agreements not related to the sale of a business. California has banned these agreements for years and agreements in restraint of trade have been banned going back to 1414 in Dyer’s case, so presumably any constitutional challenges to such a ban have been vetted and failed, or else it has just been chalked up to being … California. But the California ban is not exclusive to employees residing in California, as parties and their lawyers often seek the application of Conflicts of Laws to have the law of one state applied in another state. In addressing the potential constitutional issue, courts have held that the employee’s right to be freely employed trumps the right to contract.

In contrast, in Wisconsin, there is a pending bill that would change that state’s history of restricted enforcement of restrictive covenants. So why all the attention to noncompete agreements in the employment context? Will these bills pass or are they just one of the many events of posturing or pandering that can be expected in all legislative branches? To highlight that this is an issue that makes a difference, we refer you an older post by Jonathan Pollard where the lawyers fought over whether or not Florida (favorable to noncompetes) or Minnesota (noncompete likely unenforceable) law would apply.

Recently, bloggers, including Christopher McKinney and Eric Meyer, have addressed this subject. Apparently the state legislatures believe there is sufficient evidence of employers being heavy handed (i.e., Jimmy Johns) in the application of non-competes, Continue reading “Are Employee Non-Competes Good Policy? Many ways to Skin a Cat, Trade Secrets, Non-Solicitations, Confidential Information / NDA”

What about the Statute of Frauds (?), said the “Uniform Electronic Transactions Act” (UETA)

Posted in Electronic Signatures, General, Injunctions, Jury Issues / Trial, Real Estate

Despite its enactment in 2004 in most all of the 50 states, the Uniform Electronic Transactions Act (“UETA”) has not received the amount of attention one might expect. This is particularly true with respect to real estate transactions, for which it seems an overwhelming majority of real estate agents, brokers, realtors and others in the industry still think that “[t]he statute of frauds … requires some memorandum or note of the agreement relating to real estate to be in writing and signed by the party charged therewith or his agent.” For example, even the first source for legal research in South Carolina, S.C. Jurisprudence, the chapter on the Statute of Frauds, makes no mention of the UETA, its statutory origin at S.C. Code § 26-6-10 et seq., or its potential significance to parties negotiating a contract via email. In 2015, the vast majority of real estate transactions, whether residential or commercial, are handled by email.

According to the NCSL, 47 of the 50 states have enacted the UETA, with New York, Illinois and Washington being the exceptions, and even those states have enacted similar legislation.

Once again, despite the UETA being over 10 years old, and despite the fact that most UETA’s do not provide an exception to the applicability of the Act to “contracts for the sale of real property,” only a handful of cases can be found interpreting the UETA in conjunction with the well known SOF. Continue reading “What about the Statute of Frauds (?), said the “Uniform Electronic Transactions Act” (UETA)”

Tracking (Controversial) Gang Injunctions

Posted in Injunctions

Injunctions are a powerful legal remedy, particularly in Intellectual Property and Commercial cases, which are a focus of this blog. This topic raises the issue of how injunction rules are applied / stretched to address a particular situation.

Gang injunctions appear to be an exception to most of the traditional injunction rules, which are (supposed to be) time tested equitable principles from English Common Law. Traditional injunctions were supposed to be difficult to obtain and were to address only specifically identified issues in as narrowly tailored a means as possible to avoid irreparable harm, they require a bond by statute and by court rules, and allowed the enjoined party to move to dissolve the injunction. The reference above to “narrowly tailored” is actually borrowed from constitutional principles that apply to statutory laws that infringe on American freedoms, however, here it is also a principle that applies to injunction orders.

In cities across America, local governments are imposing “teen” curfews, and taking steps intended to protect our youth and others from danger. Continue reading “Tracking (Controversial) Gang Injunctions”