Navigation: ASU Universal
Bottom of Form
Office of General Counsel
Collegiate Trademark Licensing:
The Basic Rules of the Game
Article Authored by Glenn S. Bacal, Chair,
Intellectual Property Department, Jennings, Strouss & Salmon
Appendix 3 Coauthored by Mr. Bacal and by Steve C. Lawrence, Associate,
Jennings, Strouss & Salmon
In recent years, as the popularity of collegiate sports has increased, so too has the demand for officially licensed university memorabilia. Such memorabilia may bear not merely the University's name, but may bear the University mascot, the University nicknames, and the various logos and slogans associated with the University. Officially licensed products earn billions in revenue for American universities each year.(1)
In response to the growing popularity of college athletics, many universities have developed trademark licensing programs to ensure control over their names and marks, to ensure that those marks are associated with quality goods and services, and to generate for university programs. As the earnings reports indicate, the rewards from a successful licensing program can be great. However, establishing a successful program requires careful planning, implementation and management. A university has a significant interest in protecting its name and public reputation. In order to facilitate successful licensing, and to avoid awkward situations, the employees of a university should become familiar with the fundamentals of trademark and licensing law. In particular, they should become aware of certain measures that every university should take to protect that its trademarks.
Trademark Law
Trademark Licensing
Establishing a Successful Trademark Licensing Program
Conclusion
APPENDIX 1: FOOTNOTES
APPENDIX 2: QUALITY CONTROL MEASURES
APPENDIX 3: SOME RECENT RELEVANT CASE LAW AS COMPILED BY STEVE LAWRENCE AND GLENN BACAL
Trademark Law
1. Definition of Trademarks
Trademarks and service marks are the means by which the providers of goods and services identify and distinguish their goods and services from those provided by others. For example, consumers have come to associate the golden arches design with McDonald's restaurants.
But a trademark or service mark does more than just identify the origin of goods or services. It conveys to consumers the quality and desirability of the product or service bearing that mark. Because trademarks and service marks are repeatedly seen by customers, they come to symbolize all of the things that an institution is trying to convey to the public about its products or services. This is referred to in the field of trademark as the "goodwill" associated with the institution. This "goodwill" or reputation is often one of the most important assets of an institution. A trademark or service mark encourages customers to continue to purchase the marked products and services because of past favorable experiences associated with those products and services.
Thus, the value of a trademark or service mark rests in its ability to promote customer loyalty and goodwill. This makes trademarks and service marks of particular value to colleges and universities, which have strong interests in enhancing their reputation among their communities, as well as in generating revenue for their scholastic, research and athletic programs.
2. Types of Trademarks
A trademark or service mark may be a word, phrase, symbol, design, device, or a combination thereof. Because the law recognizes that colleges and universities have a protectable property interest in their name and emblems, these symbols can function as trademarks and service marks. Words such as "Arizona State University" or symbols like the distinctive ASU "Sparky" Sun Devil are examples of trademarks in the context of collegiate sports.
Although many university symbols traditionally are associated with athletic programs, the use of these symbols is not limited to sports memorabilia. A university's name or logo can be affixed to a virtually unlimited list of products. The most traditional goods to which University marks are affixed are clothing, cups and mugs, pencils and calendars. But in recent years, this list has expanded to many less conventional promotional items, such as stuffed animals, dolls, aprons, lamp shades, and telephones.
University symbols can also be used as service marks to identify first and foremost the educational services provided by the University, as well as its sponsorship of research and various kinds of promotional events, from charitable fundraisers to college football games.
Trademark Licensing
1. The License Agreement
A trademark license agreement is at the heart of any merchandising program, because it delineates the relationship between the owner of a trademark (the licensor) and the producer of the goods or services to which the mark is to be affixed (the licensee).(2)Through a trademark license, the licensor, such as a university, grants to the licensee the right to affix certain products or services with the licensor's mark; in return, the licensor receives some sort of monetary compensation, generally in the form of a royalty payment.
The license itself may be either written or verbal, but as with any formal agreement, it is in the trademark owner's best interest to put the license in writing. Verbal agreements are much more likely to have missing terms, and to lead later to a swearing match as to what each party really intended. It is important that the agreement clearly define the rights and responsibilities of the parties, so that any future disagreements can be quickly and efficiently resolved.
A written license agreement with well thought out terms can also help avoid disputes over whether or not the license was intended to be exclusive in any regard. For example, an exclusive license may be granted as to "sportswear" may or may not be intended to cover headwear. Putting things down on paper tends to force parties to focus on what each intends.
2. Reasons For Licensing
There are many reasons for a university to license its trademarks. A university, particularly a large university, may enjoy public recognition as an advanced institution of higher learning, research, and athletics. That reputation, in turn, fosters a demand among consumers for products bearing the university's name or logo. Licensing programs serve to protect and strengthen a university's reputation by ensuring that its marks appear only on quality products and in connection with approved events.
Moreover, whenever government funding of academic institutions declines, collegiate licensing programs provide a university with a source of supplemental income - income that can be used to fund the institution's academic and athletic programs. That income can come from unlikely places--many universities find that goods bearing their marks generate substantial revenues in certain foreign countries.
With the advent of the Internet and video-on-demand sites like "Youtube," the trade symbols used in American universities are more likely than ever to be seen in other countries. This is likely to add to consumer demand for certain marked products.
Establishing a Successful Trademark Licensing Program
Trademark licenses are essentially transfers of property rights, and therefore must be accomplished with great care. A licensor must have the ability to control which products or events are identified with its marks. Without that control, a trademark can lose the goodwill associated with it, and be considered "abandoned."
Every licensing agreement should be tailored to meet the particular needs and responsibilities anticipated by each licensing arrangement. However, there are certain provisions that should be universal to every agreement. The following discussion examines four of the more critical elements of any licensing program: quality control, preventing infringement, keeping records, and termination.
1. Registering Your Marks
In order to have a successful licensing program, it is important to obtain appropriate protection. This includes registering your important marks, particularly at the federal level. By obtaining a federal registration from the United States and Patent and Trademark Office, this provides the institution with the legal presumption that it has the exclusive right to use the mark nationwide, in connection with the goods or services for which the mark is registered. A federal registration also provides additional remedies in the event of infringement, such as increased monetary awards and reimbursement for attorneys' fees in certain cases, in addition to access to the federal courts. Federal registration also allows the trademark owner to use the ® designation to put others on notice as to trademark ownership and registration. The ® designation can only be used after federal registration is complete -- up and until then you can use the TM designation with the mark as used in connection with goods, and SM in connection with services. Finally, it is also important to register appropriate domain names associated with the institution's marks, both offensively in order to secure the rights to these domain names, and defensively to prevent infringing parties from using them.
2. The Selection of New Marks
Selecting new names, logos, designs, phrases and other marks can be an effective method of increasing licensing revenue. However, prior to using any such new marks, it is important that the new marks be searched and analyzed by an attorney, to help ensure that the new marks are protectable, and that they are not infringing upon any third parties' rights. A trademark search today can be well worth its cost over time, in helping to avoid the prospect of costly trademark disputes down the road. With the United States adherence to the Madrid Protocol, it became even more important to conduct searches broadly and to schedule follow up searches. It is much easier now for residents of the 60+ other Madrid Protocol countries to apply for trademark registrations in the United States. Consequently, the danger has increased that following the date when a search is conducted by a university for a particular mark, that a foreign applicant for the same or a similar mark might claim priority through a later filed application that relates back six months.
3. Executing Appropriate License Agreements
The university also needs appropriate, written license agreements to govern the relationship with its licensees. The license agreements should clearly set forth the rights granted to the licensee, as well as the limitations of those rights. For example, the license agreement should specify the types of goods or services covered, and whether or not the license is exclusive, and should set forth quality control obligations, and the scope, territory and duration of the license, the structure of the license fees, criteria for appropriate use of the marks, as well as conditions for termination and (if applicable) renewal, among other terms and conditions. The university also needs to be careful in selecting appropriate licensees that will produce quality goods or services, that will generate sufficient revenues, and that will represent the university well. After all, their products will be bearing the university's names and marks, and with it the reputation and goodwill of the university.
4. The Importance of Quality Control
The success of any licensing arrangement relies on the licensor's ability to control the nature and quality of the goods or services bearing its name or emblem. The value of a trademark depends upon the goodwill it fosters in consumers, who associate that mark with the quality of the service or product it identifies. If the licensor does not exercise control over the manner in which the mark is used, then the value of the mark as an indicator of quality is lost.
A significant part of trademark control can be achieved by carefully drafting the license agreement to protect the university's interests. The agreement should require the licensee to provide the university with representative samples of all licensed products for approval prior to their sale or distribution. In addition, the university should be allowed to inspect the licensee's facilities on a regular basis. Finally, the university should retain the right to approve of all artwork developed by the licensee.
Of course, contractual provisions alone will not guarantee that a university's marks are being used only with quality merchandise - the university itself must take affirmative steps to exert direct control over the licensee. In part, this means sticking to the provisions in the licensing agreement: conducting regular inspections, and requiring written confirmation that quality control procedures have been implemented. Exerting control can also entail additional activities such as providing the licensee with guidelines for the proper use of the mark, and conducting periodic checks of the marketplace. Visiting retailers, for example, can help to ensure that the university's name and logos are being used on the appropriate products with approved designs.
These and other general tips for developing a quality control program are summarized in Appendix 2.
5. University Standards for Use and Codes of Conduct
Universities need to establish standards or manuals that govern uses of their marks by licensees. This ensures that marks are used properly and consistently.
Universities are also increasingly creating various type of codes of conduct for their licensees, and/or for other companies with university contracts. Codes of conduct may include, for example, provisions to ensure certain minimum standards for the workers manufacturing the licensee's products. Indeed, there has been a growing trend toward enforcement of minimum standards for the labor conditions of licensees in the collegiate licensing context.(3)These considerations, and any related university codes of conduct, also play a role in choosing the appropriate licensees, and in drafting and enforcing the university's trademark license agreements. University codes of conduct have recently been extended to try to negotiate uses by students and University personnel of domain names that incorporate University marks.
6. Preventing Unauthorized Use of Trademarks
The most common way in which rights to a trademark or service mark can be lost is by failing to prevent use of the mark by unauthorized parties.(4)Such unauthorized use is a form of trademark infringement. Allowing infringement to continue can mean not only the loss of control over the trademark, but a loss of income as well. Manufacturers will be unwilling to pay royalties to a university if that university allows others to use the mark for free.(5)
There are several steps a university can take to protect itself against unauthorized use. As suggested above, a university should conduct market checks to detect unauthorized use of its trademarks. A university should enlist the assistance of its licensees as well; a licensing agreement may obligate a licensee to provide the university with written notice of any infringement it encounters in the marketplace.
Once it discovers evidence of unauthorized use, a university's course of action should depend upon the extent of the infringement, and the threat it represents to the institution's licensing program. With first-time infringement, it may be in the university's best interest, subject to the reputation of the infringer and the circumstances of the infringement, to give some infringers, where appropriate, the opportunity to take a license with the university. Some first-time infringers may have innocently used the university's mark, and if the infringer can provide a quality product, the university will gain a new licensee for its merchandising program.(6)
Policing sometimes requires educational institutions to face off against one another. Universities find themselves often in the uncomfortable position of making high school districts cease copycat uses of the University's marks. For example in October 2006, the University of Wisconsin challenged use of the W by a school district in Iowa, claiming that the school district's W was nearly identical to the University's logo. From 2003 to 2006, the University of Wisconsin was reported to have stopped 20 school districts to cease use of copycat logos.
Continued unauthorized use of a university's trademarks, however, may warrant a different approach. Cease and desist letters or even litigation may become necessary to prevent further harm. Of course, if a dispute with an infringer reaches this stage, a university should seek assistance of legal counsel. There are a number of legal remedies available to stop unauthorized use of one's trademarks. This is particularly true today with the continuing development of trademark laws over the past decade, which, for example, have created new causes of action for trademark owners such as trademark dilution and cybersquatting. For a discussion of some recent cases brought by universities against infringers, see Appendix 3.
7. Keeping Records
It is important for a university to keep accurate records of its correspondence with its licensees. If a licensee has failed to comply with the terms of the license, all efforts by the university to obtain compliance should be documented.
Record keeping is also important within the context of infringement, as discussed above. All correspondence with infringers, including initial contacts and demand letters, should be kept on file by the university. If further action or litigation becomes necessary, this documentation will provide proof that the university has consistently tried to stop the infringement, and has not abandoned its marks. Record keeping is also important in documented proof in infringement actions (for example, proof of consumer confusion), and in monitoring licensees for compliance with the university's quality control standards and code of conduct.
8. Terminating a Licensing Agreement
Because a university must maintain quality control standards and its code of conduct, it is important for the university to be able to cancel the licensing agreement due to the licensee's nonperformance. The license agreement should contain a revocation provision, granting to the university the right to terminate the agreement after reasonable notice (usually 30 to 60 days).
Universities should be wary of automatic renewal provisions or provisions that make termination by them as licensor more procedurally difficult or complicated. Licensees who are underperforming will try to rely upon failure to adhere strictly to such provisions in order to try to avoid termination.