What is a Trademark or Service Mark Owner’s Responsibility When Licensing a Mark for Use by Third Parties?

While a trademark can be licensed to another by the owner, the owner must exercise control over the quality of the licensee’s goods. Therefore, in order for the owner to license its mark and keep ownership of it at the same time, certain responsibilities must be met. Merely licensing the trademark to another without controlling the quality of the licensee’s goods will result to the loss of ownership over the trademark. Such a license is a license in gross and or a “naked” license.

Quality control by the licensor can take various forms. The following are forms of general standard provisions that impose some responsibility on the owner to maintain quality control: (1) the owner shall have the right to control the quality of the licensee’s products; (2) written specific guidelines or standards must be followed by the licensee; (3) the owner shall have the right to inspect the licensee’s premises and production processes; (4) the licensee shall provide product samples to the licensor according to a specific schedule; and (5) the owner shall have the right to disapprove packaging and advertising by the licensee.