What You Don’t Know About “Naked Licensing” Can Hurt You!

Short answer: if you let a partner, reseller, or OEM use your trademark without a written license and without exercising real quality control, you can be found to have naked licensed the mark, and the penalty is losing it entirely. The fix is simple: a trademark license with quality control obligations built into your partner agreements.

This is a legal blog, so yes, I am talking about naked trademark licensing. It is a handful of nuggets every software or SaaS executive should keep in mind for their partner, OEM, and reseller deals, because the downside is severe and the fix is easy.

Naked trademark licensing is a defense to a trademark infringement claim, and the consequence of tripping it is grave: abandonment of your trademark under the Lanham Act. Here are three things to remember.

1. Never Let Anyone Use Your Marks Without a License Agreement.

Any third party using your trademark should be doing so under a license that expressly conditions their use on your trademark guidelines. In plain terms, you have to supervise how they use your mark and keep it tied to the right goods and services. You do not need a separate document; you can embed this language directly in your software or SaaS partner, reseller, or OEM agreement, which is its natural home (see SaaS OEM, Reseller, and Referral Models).

2. Remember What Is at Risk.

You build a trademark, your company name or logo, and over time customers come to associate your business and its reputation with it. If you do not exercise control when third parties use your mark, you can be found to have abandoned it, which means you lose it. All that brand equity, gone, because there was no quality control behind the license.

3. Does This Really Happen?

Yes. In FreecycleSunnyvale v. Freecycle Network (9th Cir. 2010), the owner of the “Freecycle” mark let an affiliated group use it without a written license and without controlling how it was used. The Ninth Circuit found no express or actual quality control, held the mark abandoned, and the owner could no longer stop the affiliate from using it however it liked. That is the naked licensing nightmare in a single case.

The Contract Fix.

None of this is hard to avoid. License the mark in writing, require adherence to your trademark guidelines, and reserve the right to review and approve how the mark is used. What does control actually look like? It does not require you to micromanage every use. It does mean you set written brand and usage guidelines, keep the right to approve how the mark appears, and actually follow up when something is off. The same discipline applies to co-branding and to letting a reseller put your logo on their site: license it, condition it on your guidelines, and monitor it.

Trademark is one of the four IP pillars for a software company, alongside copyright, patent, and trade secret (see Intellectual Property Basics for Software Companies), and it is the one you can lose simply by being careless with your partners. If you are not sure your partner agreements handle this, that is exactly the kind of thing a software attorney checks, and you can read a little about my background before we talk.

Naked Trademark Licensing: Common Questions.

What is naked licensing?

It is letting someone use your trademark without a license that requires, and without your actually exercising, quality control over how the mark is used. Do it long enough and a court can rule that you abandoned the mark.

What happens if I am found to have naked licensed my mark?

You can lose the trademark entirely. In FreecycleSunnyvale v. Freecycle Network, the owner could no longer stop others from using the mark at all.

How much control over a licensee is enough?

You do not have to micromanage. Set written brand and usage guidelines, keep the right to approve how the mark appears, and actually follow up when a use is off-brand.

Where should the trademark license live?

Right inside your partner, reseller, or OEM agreement. You do not need a separate document for it.

Trust me on this one.

Resources:

• SaaS OEM, Reseller, and Referral Models
• Intellectual Property Basics for Software Companies
• Software Attorney

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.