Pitfalls Of Trademmark Licencing

A fundamental principle of trademark law requires a trademark owner to control the nature and quality of the goods or services sold under a licensed mark. Failure to do so may result in the loss of rights in the licensed mark. However, recent case law suggests that a trademark owner who becomes too involved in a licensee's operations runs the risk of being held liable for injuries caused by defective products produced by that licensee. Put another way, a company that allows its trademarks to appear on licensed products can be held liable under state trademark common law for injuries caused by those products.

In Kennedy v. Guess, Inc., 806 N.E.2d 776 (Ind. 2004), the Indiana Supreme Court held that a trademark licensor could be liable under a negligence theory in proportion to its role in the design, manufacturing and distribution of a licensor's defective product. In that case, the plaintiff suffered injury when an umbrella, bearing a licensed Guess trademark, broke and hit him in the face. The plaintiff subsequently brought suit against Guess, alleging both strict liability under an...