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Trademark law requires that "decision making authority over quality remains with the owner of the mark.”
Said and Nancy Ghusein sold the operation of “Eva’s Bridal” shop to Nayef Ghusein for $10. The agreement required Nayef to pay $75,000 a year for the right to use the “Eva’s Bridal” name and marks. The license agreement expired in 2002. Nayef and his corporation Halanick Enterprises have continued to operate the store under the Eva’s Bridal name without remitting a royalty. Consequently, Said and his firm Eva’s Bridal Ltd. filed the present suit under the Lanham Act, contending that Nayef and Halanick have violated the act by using the “Eva’s Bridal” mark without payment. The district court dismissed the suit on the ground that plaintiffs abandoned the “Eva’s Bridal” mark by engaging in naked licenses, i.e., by allowing others to use the mark without exercising “reasonable control over the nature and quality of the goods, services, or business on which the mark was used by the licensee; therefore, Nayef may use the mark without payment. The decision was challenged by Said and Nancy Ghusein.
Did the plaintiffs abandon their mark, thereby leading to the conclusion that defendant could use the same without payment?
The Court noted that trademark law required that decision-making authority over quality remained with the owner of the mark. In this case, the Court held that the plaintiffs had exercised no authority over the appearance and operations of defendants’ business, or even over what inventory to carry or avoid. Therefore, the appellate court affirmed the district court’s finding that the plaintiffs engaged in naked licensing, and has abandoned the mark. Therefore, the defendant may use the mark without payment.