Trademark Rights Are Threatened by a “Naked License”

Jim Singer in IP Spotlight discussed a case yesterday that has importance to IP valuators.  A so-called “naked license” of a trademark, in effect, a license with no quality control terms, use restrictions, or active monitoring, may well cause the mark owner to lose trademark rights.

The case is FreeCycle Sunnyvale v. The FreeCycle Network (9th Cir. Nov. 24, 2010). In performing valuation due diligence, valuators need to examine full text of licenses of a company’s IP, looking, among other things, for contractual restrictions on the use of a trademark.