Barcamerica International USA Trust v. Tyfield Importers, Inc.
289 F.3d 589, 52 Fed. R. Serv. 3d 415, 62 U.S.P.Q. 2d (BNA) 1673 (2002)
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Rule of Law:
A trademark owner engages in naked licensing, leading to abandonment of the mark, when it fails to exercise adequate quality control over a licensee's use of the trademark, irrespective of the licensee's objective product quality. This failure makes the mark inherently deceptive as a symbol of consistent quality and controlled source to consumers.
Facts:
- In 1982, Barcamerica International USA Trust ("Barcamerica") applied for the "Leonardo Da Vinci" trademark for wines, which the United States Patent and Trademark Office ("PTO") registered on February 14, 1984.
- In 1988, Barcamerica entered into a nonexclusive licensing agreement with Renaissance Vineyards ("Renaissance") granting Renaissance the right to use the "Da Vinci" mark for five years or 4,000 cases, but this agreement contained no quality control provision.
- In 1989, Barcamerica and Renaissance replaced their 1988 agreement with a second exclusive licensing agreement, also drafted by Barcamerica’s counsel, which similarly did not include any quality control provisions.
- Barcamerica principal George Gino Barca's only efforts to exercise "quality control" over Renaissance's wines consisted of occasional, informal tastings and reliance on the reputation of a "world-famous winemaker" employed by Renaissance at the time of the agreements, who later died.
- Cantine Leonardo Da Vinci Soc. Coop. a.r.l. ("Cantine"), an Italian wine producer, had sold wine products bearing the "Leonardo Da Vinci" tradename since 1972, began selling to U.S. importers in 1979, and exclusively through Tyfield Importers, Inc. ("Tyfield") since 1996.
- Cantine learned of Barcamerica's registration around 1996 and, believing Barcamerica had abandoned the mark, commenced a proceeding in the PTO in May 1997 seeking cancellation of Barcamerica's registration.
Procedural Posture:
- In May 1997, Cantine Leonardo Da Vinci Soc. Coop. a.r.l. ("Cantine") commenced a proceeding in the United States Patent and Trademark Office ("PTO") seeking cancellation of Barcamerica International USA Trust’s ("Barcamerica") trademark registration for the "Leonardo Da Vinci" mark, alleging abandonment.
- On January 30, 1998, Barcamerica filed the instant action against Tyfield Importers, Inc. ("Tyfield") and Cantine in the U.S. District Court for the Eastern District of California (trial court/court of first instance).
- Barcamerica then moved to suspend the PTO cancellation proceeding, which the PTO granted.
- Barcamerica moved for a preliminary injunction in the district court, enjoining Tyfield and Cantine from further use of the mark, which the district court denied, citing serious questions about Barcamerica's bona fide use and likelihood of overcoming the abandonment claim.
- Tyfield and Cantine subsequently moved for summary judgment on various grounds in the district court.
- The district court granted summary judgment for Tyfield and Cantine, concluding that Barcamerica abandoned the mark through naked licensing and that the suit was barred by the doctrine of laches.
- Barcamerica timely appealed the district court's decision.
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Issue:
Does a trademark owner abandon its mark through "naked licensing" when it grants a license without contractual quality control provisions and fails to exercise actual oversight over the quality of the goods, even if the licensee's product is objectively of good quality?
Opinions:
Majority - O’SCANNLAIN, Circuit Judge
Yes, a trademark owner abandons its mark through "naked licensing" when it grants a license without any express contractual quality control and fails to exercise meaningful actual oversight over the licensee's product quality, even if the licensee's goods are objectively good. The court affirmed the district court's finding that Barcamerica engaged in naked licensing, thereby forfeiting its rights in the "Leonardo Da Vinci" mark. The 1988 and 1989 licensing agreements between Barcamerica and Renaissance Vineyards contained no quality control provisions, and Barcamerica's purported efforts—occasional, informal wine tastings by its principal, George Gino Barca, and reliance on the reputation of a now-deceased winemaker—were insufficient to satisfy the requirement for adequate quality control. The court emphasized that while an express contract right to inspect and supervise is not always mandatory, there must be evidence that the licensor is familiar with and relies upon the licensee's own efforts to control quality, or a close working relationship. Barcamerica failed to demonstrate any knowledge of or reliance on Renaissance’s actual quality controls or any ongoing monitoring efforts. The court rejected Barcamerica's argument that the objective quality of Renaissance's wine was relevant, stating that "quality control" means consistency and predictability to prevent deception, not necessarily high quality, and that naked licensing is "inherently deceptive" as it undermines the public's assumption of a consistent source and quality.
Analysis:
This case significantly reinforces the doctrine of trademark abandonment due to naked licensing, clarifying that licensors bear an affirmative and continuous duty to ensure quality control. It establishes that simply relying on a licensee's reputation or the perceived 'goodness' of their product is insufficient to prevent abandonment; tangible contractual provisions or demonstrable active oversight are essential. The ruling serves as a crucial reminder for trademark owners to implement and diligently enforce quality control mechanisms in all licensing agreements to protect the integrity and legal standing of their marks, thereby preventing the mark from becoming inherently deceptive to consumers.
