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Naked or uncontrolled licensing of a mark occurs when a licensor allows a licensee to use the mark on any quality or type of good the licensee chooses. Such uncontrolled licensing can cause the mark to lose its significance. When a trademark owner engages in naked licensing, without any control over the quality of goods produced by the licensee, such a practice is inherently deceptive and constitutes abandonment of any rights to the trademark by the licensor. Thus, the licensor must take some reasonable steps to prevent misuses of his trademark in the hands of others. The critical question is whether the plaintiff sufficiently policed and inspected its licensee's operations to guarantee the quality of the products the licensee sold. Because a finding of insufficient control results in the forfeiture of a mark, a party asserting insufficient control by a licensor must meet a high burden of proof.
Plaintiff Phillip W. Stanfield developed several agricultural products including a fiberglass heating pad for newborn hogs. Although plaintiff was not in the business of manufacturing these products at the time of his letter, he indicated that he would call his business "Stanfield Products" if he went into business. Subsequently, defendant Osborne Industries, Inc. (OII) entered into a license agreement with plaintiff, under which defendant used the word “Stanfield” in its mark. Believing that the license agreement had expired, plaintiff brought the present action against defendants OII, Stanley M. Thibault, and Ronald M. Thibault alleging two claims under the Lanham Act, 15 U.S.C 1051-1128, and various state common law claims. The district court granted defendants' motion for summary judgment as to the Lanham Act claims and declined to exercise supplemental jurisdiction over the remaining state law claims. Plaintiff appealed.
Under the circumstances, could the defendants be held liable under the Lanham Act, 15 U.S.C 1051-1128, and various state common law claims?
The court affirmed, since the subject agreement did not contemplate that plaintiff would control plaintiff's trademark use. According to the court, the plaintiff abandoned any rights he may have had in the trademark under his license agreement with OII. The court also held that plaintiff lacked standing to bring a false advertising claim since plaintiff was not in competition with defendants and had no commercial interest in the marks. Finally, the court held that plaintiff could not prove defendants defrauded the Patent Office.