Freecycle: Trademarks are Not Free

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.