Trademark Licensor Who Fails To Exercise Control Over Mark Abandons It
EVA'S BRIDAL LTD. v. HALANICK ENTERPRISES (May 10, 2011)
Forty-five years ago, Eva Sweis opened the first "Eva's Bridal" shop in Chicago. The business was quite successful, selling dresses for brides and bridesmaids. The business eventually passed to her daughter and son-in-law. They sold one of their "Eva's Bridal" shops in a Chicago suburb to Nayef Ghusein. Their agreement required a $75,000 annual payment for the right to use the name. The agreement did not require Ghusein to conduct his operations according to any particular guidelines. The agreement expired in 2002 but Ghusein continues to operate the store under the same name without paying an annual fee. Eva's Bridal brought suit pursuant to the Lanham Act. Judge Darrah (N.D. Ill.) dismissed the complaint, concluding that plaintiffs abandoned the mark when they allowed Ghusein to use it without exercising any control over the nature and quality of the business. Plaintiffs appeal.
In their opinion, Chief Judge Easterbrook and Judges Flaum and Ripple affirmed. The Court noted that plaintiffs concede that "naked licensing" (that is, licensing without exercising control over the business) results in the abandonment of a mark. Plaintiffs contend, however, that Ghusein uses the same high-quality designers that they used when they operated the store and that they therefore had no need to oversee the business. But the Court disagreed. Trademark law does not require a licensor to insist on high-quality -- only to insist on a consistent level of quality. The degree of control required of a licensor depends both on customer expectations and the nature of the business itself. The Court concluded that it was not necessary to decide how much control was enough for these plaintiffs because they exercised no control at all. The fact that they knew the identical dresses might be available at the shop says nothing about other aspects of a customer's experience. The district court was correct in finding the mark abandoned.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select