MEMO TO:
Alexsei Demo US
RESEARCH ID:
#40006883ac1746
JURISDICTION:
Federal
STATE/FORUM:
California, United States of America
ANSWERED ON:
April 14, 2022
CLASSIFICATION:
Intellectual property

Issue:

What is the test to establish that a trademark has been abandoned?

Conclusion:

A trademark may be deemed abandoned due to nonuse, or, where the mark becomes the generic name for the type of product or otherwise loses its significance as a mark. (15 U.S.C. § 1127, Grocery Outlet Inc. v. Albertson's Inc.)

To show abandonment by nonuse, the party claiming abandonment must prove both the trademark owner's discontinuance of trademark use and intent not to resume such use.  (Grocery Outlet Inc. v. Albertson's Inc.)

Non-use requires complete cessation or discontinuance of trademark use. Trademark use is use that includes placement on goods sold or transported in commerce; is bona fide; is made in the ordinary course of trade; and, is not made merely to reserve a right in a mark. Evaluating whether a use is in the ordinary course of trade is an intensely factual undertaking and courts must consider the totality of the circumstances. (Clearly Food & Beverage Co. v. Top Shelf Beverages, Inc.)

Nonuse for three consecutive years shall be prima facie evidence of abandonment. If the party alleging abandonment establishes a prima facie case of abandonment, then a rebuttable presumption of abandonment is created, but it does not shift the burden of proof to the trademark owner.  (Burgess v. Gilman, Clearly Food & Beverage Co. v. Top Shelf Beverages, Inc.)

A mark can become generic when the owner, through omission or commission, causes the mark to lose its significance as a mark. A trademark owner's failure to police other infringing third parties may be relevant to the strength of the mark, but abandonment by genericization requires proof that the mark has lost all significance as an indication of origin. (Adidas-America, Inc. v. Payless Shoesource, Inc.)

Abandonment can be proved under the theory of naked licensing. Naked licensing occurs when the licensor fails to exercise adequate quality control over the licensee of a mark.  (Vineyard House, LLC v. Constellation Brands U.S. Operations, Inc., FreecycleSunnyvale v. Freecycle Network)

To determine whether a licensor exercised adequate control over the licensee, courts will consider whether the licensor had express contractual control over the licensee's quality control measures; actual control over the licensee's quality control measures; or was reasonable in relying on the licensee's quality control measures. (FreecycleSunnyvale v. Freecycle Network)

Law:

15 U.S.C. § 1127 provides that a trademark may be deemed abandoned due to nonuse, or, where the mark becomes the generic name for the type of product or otherwise loses its significance as a mark:

A mark shall be deemed to be "abandoned" if either of the following occurs:

(1) When its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima facie evidence of abandonment. "Use" of a mark means the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.

(2) When any course of conduct of the owner, including acts of omission as well as commission, causes the mark to become the generic name for the goods or services on or in connection with which it is used or otherwise to lose its significance as a mark. Purchaser motivation shall not be a test for determining abandonment under this paragraph.

In Grocery Outlet Inc. v. Albertson's Inc., 497 F.3d 949 (9th Cir. 2007), the United States Court of Appeals for the Ninth Circuit explained that to show abandonment by nonuse, the party claiming abandonment must prove both the trademark owner's discontinuance of trademark use and intent not to resume such use (at 951): 

To establish infringement of a registered trademark, the trademark holder must show that it is (1) the owner of a valid, protectable mark, and (2) that the alleged infringer is using a confusingly similar mark. 15 U.S.C. § 1114(1); Brookfield, 174 F.3d at 1046. Abandonment is a defense to a claim of infringement of a registered trademark. 15 U.S.C. § 1115(b)(2). The Lanham Act provides for two ways that a trademark may be abandoned, namely, through (1) nonuse, or (2) the mark becoming generic. See 15 U.S.C. § 1127. To show abandonment by nonuse, the party claiming abandonment must prove both the trademark owner's (1) "discontinuance of trademark use" and (2) "intent not to resume such use." Electro Source, LLC v. Brandess-Kalt-Aetna Group, Inc., 458 F.3d 931, 935 (9th Cir.2006) (citing 15 U.S.C. § 1127).

In Burgess v. Gilman, 475 F.Supp.2d 1051 (D. Nev. 2007), the United States District Court for the Northern District of California explained that under the Lanham Act, a mark shall be deemed abandoned when its use has been discontinued with an intent not to resume such use. This is known as voluntary abandonment. Nonuse for three consecutive years shall be prima facie evidence of abandonment. The abandonment of a trademark must be strictly proved and some courts have applied a clear and convincing evidence standard as the burden of proof. If the party alleging abandonment establishes a prima facie case of abandonment by showing a three-year period of non-use, then a rebuttable presumption of abandonment is created (at 1059):

The Lanham Act provides:

A mark shall be deemed to be "abandoned" ...:

(1) When its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima facie evidence of abandonment. "Use" of a mark means the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.

15 U.S.C. § 1127. "Abandonment of a trademark, being in the nature of a forfeiture, must be strictly proved." Prudential Ins. Co. of America v. Gibraltar Fin. Corp. of Cal., 694 F.2d 1150, 1156 (9th Cir.1982). The Ninth Circuit has noted that it "has not spoken as to what `strictly proved' means," Electro Source, 458 F.3d at 935 n. 2, but other courts have applied a "clear and convincing evidence" standard as the burden of proof. Id.E.g. EH Yacht, LLC v. Egg Harbor, LLC, 84 F.Supp.2d 556, 564 (D.N.J.2000) (citing McCarthy § 17:12 (4th ed.1999)).

If the party alleging abandonment establishes a prima facie case of abandonment by showing a three-year period of non-use, then "a rebuttable presumption of abandonment is created." Abdul-Jabbar v. Gen. Motors Corp., 85 F.3d 407, 411 (9th Cir.1996); Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 769 F.2d 1393, 1396 (9th Cir.1985). The presumption places a burden of production on the party contesting abandonment. Emergency One, Inc. v. Am. FireEagle Ltd., 228 F.3d 531, 535-37 (4th Cir.2000).

In the Ninth Circuit, after a prima facie showing of abandonment has been established, the burden of production is shifted, but not the burden of persuasion. A prima facie case of abandonment may be rebutted by showing valid reasons for nonuse or lack of intent to resume use within the reasonably foreseeable future. When the alleged period of nonuse is less than three years, no presumption of abandonment attaches and the challenging party must show by clear and convincing evidence nonuse and intent not to resume use in the reasonably foreseeable future (at 1060): 

In Abdul-Jabbar, the Ninth Circuit noted the following circuit split:

In some circuits, a showing of nonuse shifts the burden of persuasion to the trademark owner to show intent to resume; in others, including the Ninth, Second and Seventh, prima facie abandonment creates only a rebuttable presumption of abandonment.

85 F.3d at 411 n. 4. In other words, it appears that in the Ninth Circuit the burden of production is shifted, but not the burden of persuasion. Alternatively, one might conclude that there is no burden shifting, as the Ninth Circuit cases do not explicitly state that any burden is shifted, but it is hard to see what difference this might make.

"[A] prima facie case of abandonment may be rebutted by showing [(1)] valid reasons for non-use or [(2)] lack of intent" to resume use within the reasonably foreseeable future. Abdul-Jabbar, 85 F.3d at 411; Electro Source, 458 F.3d at 937-9.

When the alleged period of nonuse is less than three years, no presumption of abandonment attaches and the challenging party must show by clear and convincing evidence (1) non-use and (2)intent not to resume use in the reasonably foreseeable future. Chere Amie, Inc. v. Windstar Apparel. Corp., 191 F.Supp.2d 343, 349 (S.D.N.Y., 2001) (citing Stetson v. Howard D. Wolf & Assocs., 955 F.2d 847, 850 (2nd Cir.1992)).

In Clearly Food & Beverage Co. v. Top Shelf Beverages, Inc., 102 F.Supp.3d 1154 (W.D. Wash. 2015), the United States District Court for the Western District of Washington noted that in the Ninth Circuit, nonuse for three consecutive years creates a rebuttable presumption of abandonment, but it does not shift the burden of proof to the trademark owner. Nonuse requires complete cessation or discontinuance of trademark use. Trademark use is use that includes placement on goods sold or transported in commerce; is bona fide; is made in the ordinary course of trade; and, is not made merely to reserve a right in a mark. Evaluating whether a use is in the ordinary course of trade is an intensely factual undertaking and courts must consider the totality of the circumstances. The Court noted that the Ninth Circuit had yet not determined whether the standard of proof to prove abandonment requires clear and convincing evidence or a preponderance of the evidence and declined to decide the issue (at 1161-1162): 

“To prove abandonment of a mark as a defense to a claim of trademark infringement, a defendant must show that there was: ‘(1) discontinuance of trademark use and (2) intent not to resume such use.’ ” Wells Fargo & Co. v. ABD Ins. & Fin. Servs., Inc., 758 F.3d 1069, 1072 (9th Cir.2014), as amended (Mar. 11, 2014) (quoting Electro Source, LLC v. Brandess–Kalt–Aetna Grp., Inc., 458 F.3d 931, 935 (9th Cir.2006)); see also15 U.S.C. § 1127(1). Non-use for three consecutive years constitutes prima facie evidence of abandonment. Herb Reed Enterprises, LLC v. Fla. Entm't Mgmt., Inc., 736 F.3d 1239, 1247–48 (9th Cir.2013); 15 U.S.C. § 1127(1). In the Ninth Circuit, non-use for three consecutive years creates only a rebuttal presumption of abandonment—it does not shift the burden of proof to the trademark owner.

[102 F.Supp.3d 1162]

Abdul–Jabbar v. Gen. Motors Corp., 85 F.3d 407, 411 (9th Cir.1996). A trademark owner can rebut the presumption of abandonment by showing valid reasons for non-use or lack of intent to abandon the mark. Id.

“The standard for non-use is high.” Herb Reed Enterprises, LLC, 736 F.3d at 1247–48. “Non-use requires ‘complete cessation or discontinuance of trademark use.’ ” Id. (quoting Electro Source, LLC, 458 F.3d at 936). The phrase “trademark use” means use that “includes placement on goods sold or transported in commerce; is bona fide; is made in the ordinary course of trade; and is not made merely to reserve a right in a mark.”1Electro Source, LLC, 458 F.3d at 936 (quoting 15 U.S.C. § 1127). Even a “single instance of use is sufficient against a claim of abandonment of a mark if such use is made in good faith.” Wells Fargo & Co., 758 F.3d at 1072 (quoting Carter–Wallace, Inc. v. Procter & Gamble Co., 434 F.2d 794, 804 (9th Cir.1970)).

Evaluating whether a use is in “the ordinary course of trade” is “often an intensely factual undertaking.” Electro Source, LLC, 458 F.3d at 940. Courts must consider the “totality of the circumstances” to determine if genuine, albeit limited usage of the mark occurred “in the ordinary course of trade.” Id.; Wells Fargo & Co., 758 F.3d at 1072. Relevant factors include the “genuineness and commercial character of the activity, the determination of whether the mark was sufficiently public to identify or distinguish the marked [products] in an appropriate segment of the public mind as those of the holder of the mark, the scope of the [trademark] activity relative to what would be a commercially reasonable attempt to market the service [or product], the degree of ongoing activity of the holder to conduct the business using the mark, [and] the amount of business transacted.” Electro Source, LLC, 458 F.3d at 941 (quoting Chance v. Pac–Tel Teletrac Inc.,242 F.3d 1151, 1159 (9th Cir.2001)). “Good faith nominal or limited commercial sales of trademarked goods are sufficient ... to avoid abandonment [ ] where the circumstances legitimately explained the paucity of the sales.” Electro Source, LLC, 458 F.3d at 939.

Because abandonment of a trademark is “in the nature of forfeiture, [it] must be strictly proved.” FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 515 (9th Cir.2010). The Ninth Circuit has not determined whether this high standard of proof requires “clear and convincing” evidence or a “preponderance of the evidence.” Id.; see Grocery Outlet Inc. v. Albertson's Inc., 497 F.3d 949, 954 (9th Cir.2007)(separate concurrences disagreeing as to the applicable standard of proof). The court need not decide which standard of proof applies here because, viewing the evidence in the light most favorable to Clearly Food, Top Shelf fails to carry its burden under either standard. See FreecycleSunnyvale, 626 F.3d at 515(declining to decide which standard applied to a motion for summary judgment); Electro Source, LLC, 458 F.3d at 936(same).

In Adidas-America, Inc. v. Payless Shoesource, Inc., 546 F.Supp.2d 1029 (D. Or. 2008), the United States District Court for the District of Oregon explained that a mark can become generic when the owner, through omission or commission, causes the mark to lose its significance as a mark. A trademark owner's failure to police other infringing third parties may be relevant to the strength of the mark, but abandonment by genericization requires proof that the mark has lost all significance as an indication of origin (at 1076):

In cases like this, where a defendant is not claiming non-use of the trademark, "a mark shall be deemed `abandoned' ... when any course of conduct of the owner, including acts of omission as well as commission causes the mark to become ... generic ..., or otherwise to lose its significance as a mark." 15 U.S.C. § 1127 (emphasis added). In reviewing allegations that a plaintiff has abandoned a trademark by failing to enforce it, the Ninth Circuit has held that the mere existence of third-party infringers is irrelevant. See Eclipse Assocs. Ltd. v. Data Gen. Corp., 894 F.2d 1114, 1119 (9th Cir.1990) ("Evidence of other potential infringers is irrelevant to claims of trademark infringement and unfair competition under federal law."). Though a plaintiffs failure to sue potentially infringing third parties may be relevant to the strength of the mark, "[a]bandonment ... requires proof that the mark has lost all significance as an indication of origin. That is, the mark is completely without signs of life." McCarthy § 17:17 (emphasis in original); see also Herman Miller, Inc. v. Palazzetti Imports and Exports, Inc., 270 F.3d 298, 310 (6th Cir.2001) ("[A]bandonment occurs `only when all rights of protection are extinguished.'") (citation omitted). "Abandonment of a trademark, being in the nature of a forfeiture, must be strictly proved." Prudential Ins. Co. of Am. v. Gibraltar Fin. Corp., 694 F.2d 1150, 1156 (9th Cir.1982).

In Vineyard House, LLC v. Constellation Brands U.S. Operations, Inc., 515 F.Supp.3d 1061 (N.D. Cal. 2021), the United States District Court for the Northern District of California discussed abandonment in the context of naked licensing, explaining that where the licensor fails to exercise adequate quality control over the licensee, a court may find that the trademark owner has abandoned the trademark. The proponent of a naked license theory of abandonment must meet a stringent standard of proof (at 1078–1079):

To prove abandonment, TVH must show that Constellation licensed the use of the To Kalon and To Kalon Vineyard trademarks and then failed to control the quality of goods produced by its licensees and sub-licensees in an adequate manner. Barcamerica Int'l USA Tr. v. Tyfield Importers, Inc., 289 F.3d 589, 595-96 (9th Cir. 2002). "[T]he proponent of a naked license theory of trademark abandonment must meet a stringent standard of proof." FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 514-15 (9th Cir. 2010).11 As the Ninth Circuit has explained:

Naked licensing occurs when the licensor fails to exercise adequate quality control over the licensee.... Naked licensing may result in the trademark's ceasing to function as a symbol of quality and a controlled source.... We have previously declared that naked licensing is inherently deceptive and constitutes

[515 F.Supp.3d 1079]

abandonment of any rights to the trademark by the licensor.... Consequently, where the licensor fails to exercise adequate quality control over the licensee, a court may find that the trademark owner has abandoned the trademark, in which case the owner would be estopped from asserting rights to the trademark....

Id. at 515-16 (internal quotation marks and citations omitted). The purpose of "controlling" the "quality of goods" is to protect the trademark.

In FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 97 U.S.P.Q.2d 1127 (9th Cir. 2010), the United States Court of Appeals for the Ninth Circuit noted that the proponent of a naked license theory of trademark abandonment must meet a stringent standard of proof; however, the Ninth Circuit had not yet determined whether this standard of proof required clear and convincing evidence or a preponderance of the evidence. The Court declined to decide this issue after finding that under either standard, and viewing the evidence in the light most favorable to the non-moving party, TFN, the moving party demonstrated that TFN engaged in naked licensing and consequently abandoned the trademarks (at 514-515): 

In ruling on a motion for summary judgment, our inquiry "necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits." Id. at 252, 106 S.Ct. 2505. We have held that the proponent of a naked license theory of trademark abandonment must meet a "stringent standard of proof." Barcamerica, 289 F.3d at 596 (internal quotation marks omitted); see also Prudential Ins. Co. of Am. v. Gibraltar Fin. Corp. of Cal., 694 F.2d 1150, 1156 (9th Cir.1982) ("Abandonment of a trademark, being in the nature of forfeiture, must be strictly proved."); Edwin K. Williams & Co. v. Edwin K. Williams & Co. E., 542 F.2d 1053, 1059 (9th. Cir.1976) ("[A] person who asserts insufficient control [of a trademark] must meet a high burden of proof.").

We have yet to determine, however, whether this high standard of proof requires "clear and convincing" evidence or a "preponderance of the evidence." See Electro Source, LLC v. Brandess-Kalt-Aetna Group, Inc., 458 F.3d 931, 935 n. 2 (9th Cir.2006) (reserving the issue of the standard of proof to show trademark abandonment, but noting that at least one district

[626 F.3d 515]

court in the Ninth Circuit had required "clear and convincing" evidence). Indeed, in Grocery Outlet Inc. v. Albertson's Inc., 497 F.3d 949, 952-54 (9th Cir.2007) (per curiam), Judges Wallace and McKeown disagreed in separate concurrences as to which standard applies. Judge Wallace advocated the clear and convincing standard, while Judge McKeown argued that the preponderance of the evidence standard applied. Id.

A review of our sister circuits' decisions reveals that only two circuits have considered which standard to apply, with one reserving the issue and the other adopting a preponderance of the evidence standard. See Cumulus Media, Inc. v. Clear Channel Commcn's, Inc., 304 F.3d 1167, 1175 n. 12 (11th Cir.2002) (declining to address the meaning of "strict burden" because the outcome of the case would be the same with either standard of proof); Cerveceria Centroamericana, S.A. v. Cerveceria India, Inc., 892 F.2d 1021, 1024 (Fed.Cir.1989) (adopting the preponderance of the evidence standard). Most published lower court decisions that have reached this issue appear to have interpreted the "strictly proven" standard to require "clear and convincing" evidence of naked licensing. See 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 17:12 n.2 (4th ed.2010).5

Here, we need not decide which standard of proof applies because, even applying the higher standard of proof—clear and convincing—and viewing the evidence in the light most favorable to TFN as the non-moving party, FS has demonstrated that TFN engaged in naked licensing and consequently abandoned the trademarks.

Naked licensing occurs when the licensor fails to exercise adequate quality control over the licensee. In this case, the moving party, FS, argued that TFN allowed them to use the trademarks with so few restrictions as to compel a finding that TFN engaged in naked licensing and abandoned the trademarks (at 515-516): 

"Naked licensing" occurs when the licensor "fails to exercise adequate quality control over the licensee." Id. at 596. Naked licensing may result in the trademark's ceasing to function as a symbol of quality and a controlled source. Id. (citing McCarthy § 18:48). We have previously

[626 F.3d 516]

declared that naked licensing is " inherently deceptive and constitutes abandonment of any rights to the trademark by the licensor." Id. at 598. "Consequently, where the licensor fails to exercise adequate quality control over the licensee, 'a court may find that the trademark owner has abandoned the trademark, in which case the owner would be estopped from asserting rights to the trademark.' " Id. at 596 (quoting Moore, 960 F.2d at 489).

A

At issue here is whether there is clear and convincing evidence, viewed in the light most favorable to TFN, that TFN allowed FS to use the trademarks with so few restrictions as to compel a finding that TFN engaged in naked licensing and abandoned the trademarks. TFN contends that disputed issues of material fact remain as to whether TFN's quality control standards, during the relevant time period, were sufficient. Although TFN concedes that it did not have an express license agreement, it alleges that a reasonable jury could find that it had adequate quality control measures in place when FS was authorized to use the trademarks, making summary judgment inappropriate.

The Court found that TFN did not retain express contractual control over FS's quality control measures, did not have actual control over FS's quality control measures, and was unreasonable in relying on FS's quality control measures. Therefore, the Court concluded that TFN engaged in naked licensing and consequently abandoned the trademarks (at 516-520): 

When deciding summary judgment on claims of naked licensing, we first determine whether the license contained an express contractual right to inspect and supervise the licensee's operations. See Barcamerica, 289 F.3d at 596. The absence of an agreement with provisions restricting or monitoring the quality of goods or services produced under a trademark supports a finding of naked licensing. Id. at 597; see also Stanfield v. Osborne Indus., Inc., 52 F.3d 867, 871 (10th Cir.1995) (granting summary judgment where license agreement lacked right to inspect or supervise licensee's operations and gave the licensee sole discretion to design the trademark).

TFN concedes that it did not have an express license agreement with FS regarding FS's use of the trademarks. Without an express license agreement, TFN necessarily lacks express contractual rights to inspect and supervise FS. However, TFN argues that the October 9, 2003 email, in which Beal advised Abraham that: "You can get the neutral logo from www. freecycle. org, just don't use it for commercial purposes....", reflects an implied license. Emphasis added.

Even assuming that Beal's emailed admonition to Abraham not to use the trademarks for commercial purposes constitutes an implied licensing agreement, it contained no express contractual right to inspect or supervise FS's services and no ability to terminate FS's license if FS used the trademarks for commercial purposes. See Barcamerica, 289 F.3d at 597 (determining that a license agreement lacking similar controls was insufficient). We therefore hold that, by TFN's own admission, there is no disputed issue of material fact as to whether TFN maintained an express contractual right to control quality.

2

TFN next contends that, despite its lack of an express contractual right to control quality, a material issue of fact remains as to whether TFN maintained actual control over its member groups' services and use of the trademarks when FS was granted use of the trademarks in October 2003. "The lack of an express contract right to inspect and supervise a licensee's operations is not conclusive evidence of lack of control." Barcamerica, 289 F.3d at 596. However, where courts have excused the lack of a

[626 F.3d 517]

contractual right to control quality, they have still required that the licensor demonstrate actual control through inspection or supervision. See, e.g., Stanfield, 52 F.3d at 871 ("The absence of an express contractual right of control does not necessarily result in abandonment of a mark, as long as the licensor in fact exercised sufficient control over its licensee.").

TFN asserts that it exercised actual control over the trademarks because it had several quality control standards in place, specifically: (1) the "Keep it Free, Legal, and Appropriate for all Ages" standard and TFN's incorporation of the Yahoo! Groups' service terms; (2) the non-commercial services requirement (expressed in Beal's October 9, 2003 email); (3) the etiquette guidelines listed on TFN's website; and (4) TFN's "Freecycle Ethos" which, TFN contends, establishes policies and procedures for member groups, even if local member groups are permitted flexibility in how to apply those policies and procedures. In addition, TFN cites Birthright v. Birthright, Inc., 827 F.Supp. 1114 (D.N.J.1993) for the principle that loosely organized non-profits like TFN and FS that share "the common goals of a public service organization" are subject to less stringent quality control requirements.

First, we disagree with TFN's contentions that the "Keep it Free, Legal, and Appropriate for all Ages" standard and its incorporation of the Yahoo! Groups' service terms constituted actual controls over its member groups. 6 The undisputed evidence showed that TFN's licensees were not required to adopt the "Keep it Free, Legal, and Appropriate for all Ages" standard, nor was it uniformly applied or interpreted by the local groups. Similarly, FS was not required to use Yahoo! Groups and was not asked to agree to the Yahoo! Groups' service terms as a condition of using TFN's trademarks. Moreover, the Yahoo! Groups' service terms, which regulate generic online activity like sending spam messages and prohibiting harassment, cannot be considered quality controls over TFN's member groups' services and use of the trademarks. The service terms apply to every Yahoo! Group, and do not control the quality of the freecycling services that TFN's member groups provide. Thus, the "Keep it Free, Legal and Appropriate for All Ages" standard and the Yahoo! Groups' service terms were not quality controls over FS's use of the trademarks.

Second, we conclude that TFN's non-commercial requirement says nothing about the quality of the services provided by member groups and therefore does not establish a control requiring member groups to maintain consistent quality. Thus, it is not an actual control in the trademark context. Third, because member groups may freely adopt and adapt TFN's listed rules of etiquette and because of the voluntary and amorphous nature of these rules, they cannot be considered an actual control. For example, FS modified the etiquette that was listed on TFN's website and TFN never required FS to conform to TFN's rules of

[626 F.3d 518]

etiquette. Fourth, TFN admits that a central premise of its "Freecycle Ethos" is local enforcement with local variation. By definition, this standard does not maintain consistency across member groups, so it is not an actual control.

Even assuming that TFN's asserted quality control standards actually relate to the quality of its member groups' services, they were not adequate quality controls because they were not enforced and were not effective in maintaining the consistency of the trademarks. Indeed, TFN's alleged quality controls fall short of the supervision and control deemed inadequate in other cases in which summary judgment on naked licensing has been granted to the licensee. See, e.g., Barcamerica, 289 F.3d at 596-97 (finding no express contractual right to inspect and supervise the use of the marks coupled with licensor's infrequent wine tastings and unconfirmed reliance on the winemaker's expertise was inadequate evidence of quality controls to survive summary judgment); Stanfield, 52 F.3d at 871 (granting summary judgment to the licensee where the license agreement lacked a right to inspect or supervise licensee's operations, and alleged actual controls were that the licensor examined one swine heating pad, looked at other pet pads, and occasionally reviewed promotional materials and advertising).

Moreover, even if we were inclined to accept the premise allegedly set forth in Birthright, that loosely organized non-profits that share common goals are subject to less stringent quality control requirements for trademark purposes, the result would be the same. In Birthright, the court held that the license was not naked because the licensor "monitored and controlled" its licensees' use of the trademarks. 827 F.Supp. at 1139-40; see also Barcamerica, 289 F.3d at 596 (holding that a licensor may overcome the lack of a formal agreement if it exercises actual control over its licensees). Here, TFN exercised no actual control over its licensees, so even under a less stringent standard, TFN has not raised a material issue of fact as to whether it exercised actual control over FS's use of the trademarks. See Barcamerica, 289 F.3d at 598.

3

TFN contends that even if it did not exercise actual control, it justifiably relied on its member groups' quality control measures. Although "courts have upheld licensing agreements where the licensor is familiar with and relies upon the licensee's own efforts to control quality," Barcamerica, 289 F.3d at 596 (internal quotation marks and brackets omitted), we, like the other circuits that have considered this issue, have required that the licensor and licensee be involved in a "close working relationship" to establish adequate quality control in the absence of a formal agreement, id. at 597; accord Stanfield, 52 F.3d at 872; Taco Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1121 (5th Cir.1991). In Barcamerica, we cited four examples of "close working relationships" that would allow the licensor to rely on the licensee's own quality control: (1) a close working relationship for eight years; (2) a licensor who manufactured ninety percent of the components sold by a licensee and with whom it had a ten year association and knew of the licensee's expertise; (3) siblings who were former business partners and enjoyed a seventeen-year business relationship; and (4) a licensor with a close working relationship with the licensee's employees, and the pertinent agreement provided that the license would terminate if certain employees ceased to be affiliated with the licensee. 289 F.3d at 597.

[626 F.3d 519]

Here, TFN and FS did not enjoy the type of close working relationship that would permit TFN to rely on FS's quality control measures. TFN had no long term relationship with Abraham or the FS group. In fact, the October 9, 2003 email between Beal and Abraham, which mentions using the TFN logo, was the parties' first and only written communication about the trademarks prior to TFN's requests to stop using them in November 2006. In addition, TFN had no experience with FS that might have supported its alleged confidence in FS's quality control measures. Thus, even considered in a light most favorable to TFN, no evidence showed the type of close working relationship necessary to overcome TFN's lack of quality controls over FS. See id.

Furthermore, we have held that, while reliance on a licensee's own quality control efforts is a relevant factor, such reliance is not alone sufficient to show that a naked license has not been granted.7 See Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1017-18 (9th Cir.1985) (noting that, although the licensor had worked closely with the licensee for ten years, the licensor did not rely solely on his confidence in the licensee, but exercised additional control by, inter alia, periodically inspecting those goods and was consulted regarding any changes in the product). Because sole reliance on a licensee's own control quality efforts is not enough to overcome a finding of naked licensing without other indicia of control, see id. at 1017-18, and because TFN lacked a close working relationship with FS and failed to show any other indicia of actual control, we conclude that TFN could not rely solely on FS's own quality control efforts.

B

TFN's three remaining arguments also fail to raise a material issue of fact that precludes a grant summary of judgment for FS. First, TFN asserts that it should be subject to a lesser level of quality control standard because its services are not dangerous to the public and the public expects local variation in services so the probability of deception is low. We have stated that the "standard of quality control and the degree of necessary inspection and policing by the licensor will vary." Barcamerica, 289 F.3d at 598. The licensor need only exercise "control sufficient to meet the reasonable expectations of customers." McCarthy, § 18:55. However, because TFN did not establish any quality control requirements for its member groups, we do not need to decide what efforts to oversee a licensee's performance might meet a low standard of quality control.

TFN's remaining two arguments—(1) that FS must show both naked licensing and a loss of trademark significance, and (2) that FS is estopped from supporting its naked licensing defense with evidence that demonstrates that TFN did not adequately control the services offered by FS when using the trademarks—are both raised for the first time on appeal, so we decline to reach them. See United States v. Robertson, 52 F.3d 789, 791 (9th Cir.1994) ("Issues not presented to the district court

[626 F.3d 520]

cannot generally be raised for the first time on appeal.").

IV

We determine, viewing the record in the light most favorable to TFN, that TFN (1) did not retain express contractual control over FS's quality control measures, (2) did not have actual control over FS's quality control measures, and (3) was unreasonable in relying on FS's quality control measures. Therefore, we conclude that TFN engaged in naked licensing and consequently abandoned the trademarks. The district court's grant of summary judgment in favor of FS and against TFN is AFFIRMED.

Authorities:
15 U.S.C. § 1127
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