TMEP 1201.03(e): License and Franchise Situations

October 2017 Edition of the TMEP

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1201.03(e)    License and Franchise Situations

The USPTO accepts applications by parties who claim to be owners of marks through use by controlled licensees, pursuant to a contract or agreement. Pneutek, Inc. v. Scherr, 211 USPQ 824, 833 (TTAB 1981).

A controlled licensing agreement may be recognized whether oral or in writing. In re Raven Marine, Inc., 217 USPQ 68, 69 (TTAB 1983).

If the application indicates that use of the mark is pursuant to a license or franchise agreement, and the record contains nothing that contradicts the assertion of ownership by the applicant (i.e., the licensor or franchisor), the examining attorney will not inquire about the relationship between the applicant and the related company (i.e., the licensee or franchisee).

Ownership rights in a trademark or service mark may be acquired and maintained through the use of the mark by a controlled licensee even when the only use of the mark has been made, and is being made, by the licensee. Turner v. HMH Publ'g Co., 380 F.2d 224, 229, 154 USPQ 330, 334 (5th Cir. 1967), cert. denied, 389 U.S. 1006, 156 USPQ 720 (1967); Cent. Fid. Banks, Inc. v. First Bankers Corp. of Fla., 225 USPQ 438, 440 (TTAB 1984) (holding that use of the mark by petitioner’s affiliated banks considered to inure to the benefit of petitioner bank holding company, even though the bank holding company could not legally render banking services and, thus, could not use the mark).

Joint applicants enjoy rights of ownership to the same extent as any other "person" who has a proprietary interest in a mark. Therefore, joint applicants may license others to use a mark and, by exercising sufficient control and supervision of the nature and quality of the goods or services to which the mark is applied, the joint applicants/licensors may claim the benefits of the use by the related company/licensee. In re Diamond Walnut Growers, Inc. and Sunsweet Growers Inc., 204 USPQ 507, 510 (TTAB 1979).

Stores that are operating under franchise agreements from another party are considered "related companies" of that party, and use of the mark by the franchisee/store inures to the benefit of the franchisor. Mr. Rooter Corp. v. Morris, 188 USPQ 392, 394 (E.D. La. 1975); Southland Corp. v. Schubert, 297 F. Supp. 477, 160 USPQ 375, 381 (C.D. Cal. 1968).

In all franchise and license situations, the key to ownership is the nature and extent of the control by the applicant over the goods or services to which the mark is applied. A trademark owner who fails to exercise sufficient control over licensees or franchisees may be found to have abandoned its rights in the mark. See Hurricane Fence Co. v. A-1 Hurricane Fence Co., 468 F. Supp. 975, 986; 208 USPQ 314, 325 (S.D. Ala. 1979).

In general, where the application states that a mark is used by a licensee or franchisee, the USPTO does not require an explanation of how the applicant controls the use.