The Virtue Of A UPC Code For Brand Protection

A brand is a brand is a brand...or so it would seem. Purveyors of fashion understand the allure of a brand in connection with sales. While knock-offs are ubiquitous and virtually a religion in the United States, apparel which is branded with a recognized label has a greater cachè and commands both prestige and better pricing. The trademark serves not only to identify the source of the garment but the quality and standards associated with the trademark. So when a consumer opts to buy a branded product as opposed to a knock off, there is an implied guaranty of certain quality standards associated with such a brand.

Licensing brands and ancillary thereto franchising have become integral to the growth and breadth of a brand's expansion. Because of the consumer's understanding, a licensor who engages in naked licensing can lose its trademark. A naked license is one in which the licensor does not retain or enforce quality controls. The reason should be obvious, if a trademark is indeed to represent a value associated with the brand, a diminution due to lack of controls makes the brand at best deceptive.

Failure to maintain quality can lead to claims that the licensor granted a naked license which is a defense against trademark infringement. The antithesis occurs when one imposes quality controls and seeks to enforce the same. Under those circumstances the courts will seek to enhance the remedies available to a trademark holder, such as granting an injunction against the sale of grey market goods, an equitable remedy, which would otherwise be unavailable.

The courts will look to three (3) key factors in determining if a license constitutes a naked license; all of those factors pivot on the issue of quality. First, did the brand owner retain the right to determine quality standards? Second, even if the brand owner retained the right to exercise control over quality, did he in fact exercise the control, or did he just sit back. Third, was there a reasonable reliance to rely upon the licensee to maintain control?

The first and third quality factors in determining a naked license are obvious. However the exercise of control is what often trips up the licensor. What steps should a licensor undertake to maintain control? Zino Davidoff ("Davidoff") exemplifies the extent to which some manufacturers will go to protect quality and as a concomitant the added value to the brand by doing so.

In Zino Davidoff SA v. CVS Corp., No. 07-2872 (2nd Cir. 2009)...