Freecycle: Trademarks are Not Free

Posted by | November 29, 2010 | General | No Comments

VS. 

Freecycling is the benevolent act of giving away unwanted items rather than disposing of them.  There are numerous groups that facilitate freecycling, including The Freecycle Network and FreecycleSunnyvale.

FS started using FREECYCLESUNNYVALE without knowledge of TFN.  Subsequently, FS contacted TFN to join its network of freecylcing groups.  When the relationship between the organizations went south, TFN tried to prevent TS from continuing to use the FREECYCLESUNNYVALE mark, claiming it infringed upon TFN’s rights in its FREECYCLE mark.

On January 18, 2006, the folks at FreecycleSunnyvale (FS) filed a lawsuit against The Freecycle Network (TFN) for Declaratory Judgment.  In the lawsuit, FS asked the court to rule that the term FREECYCLE is generic and thus find that FS’s use of the term FREECYCLE does not infringe upon TFN’s rights in the FREECYCLE mark.  TFN then counter-sued FS for trademark infringement on April 14, 2006.  Later on in the case, FS filed a motion for summary judgment asking the court to dismiss the infringement claims against it based on TFN’s naked licensing of the FREECYCLE mark.

While naked licensing sounds like a lot of fun, it really isn’t.  Instead, it can be a death sentence for the trademark.  Trademark owners have the obligation to exercise quality control over the goods and services offered under their marks.  This rule furthers the consumer protection aspect of trademark law — consumers have a right to consistent quality each time they purchase goods and services offered under a single mark.  When a trademark owner allows a third party to use its mark without exercising the requisite quality control, that’s considered naked licensing, the result of which can be an abandonment of all rights in the mark.

The District Court granted FS’ Summary Judgment motion, holding that TFN had abandoned its rights in the FREECYCLE mark due to naked licensing.  TFN appealed to the Ninth Circuit, which upheld the District Courts ruling on the issue of abandonment through naked licensing.  The Ninth Circuit found that not only had TFN failed to enter into an agreement with FS allowing it to control the quality of services offered under the FREECYCLE mark, but it also failed to exercise actual control over FS’s use of the FREECYCLE mark, effectuating an abandonment in its rights therein.

The Ninth Circuit’s message to trademark owners is clear:  if you license your mark to others, you must provide for, and exercise, quality control over the goods and services offered by your licensee or risk abandoning your rights all together.

About Lara

Lara Pearson is a trademark attorney with Exemplar, where she also serves as the firm's Sustainability Steward. Lara's legal practice focuses on trademark and copyright law, including: intellectual property audits; trademark search & clearance; trademark and copyright registration & maintenance; intellectual property transfers; transactional work; and dispute resolution, including litigation when necessary. Lara primarily represents other social enterprises -- those leveraging their businesses and brands as catalysts for positive social and environmental change. Such businesses engage in CSR (Corporate Social Responsibility) to have a positive "triple bottom line" of people, planet and profit. As Exemplar's Sustainability Steward, Lara works with others in her law firm to measure and reduce the firm's carbon emissions and encourage engagement in social responsibility initiatives, including pro bono legal work and volunteering. Lara is a proud member of the Social Venture Network. Brand Geek is a member of 1% for the Planet and a Certified B Corporation, whose Incline Village office is certified under the regional Keep the Sierra Green program. Exemplar Companies is the most innovative professional services firm in the New Economy. Our unique, diversified expertise spans the disciplines of corporate law, business advisory, and capital/investment banking to better meet the needs of our high-potential customers. We have assembled a comprehensive suite of service to meet the complex issues facing companies in today’s challenging business environment. Our unique, holistic approach ensures the growth and success – and greatly increases the competitive advantage - of our customers. The Exemplar team is comprised of knowledgeable, highly skilled experts in a wide range of industries and disciplines. They work closely with our customers to provide trusted advice, incomparable support, expert guidance and the ultimate competitive advantage as they accelerate their businesses and position themselves to transform industries.

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