Novelty companies frequently make deals with owners of adult-industry trademarks – studios, stars, and so forth – to use their names in connection with products. This often is a terrific deal for both sides. But for the trademark owner, it is a minefield if not done with appropriate care. It could even jeopardize the validity of your valuable mark.
Trademarks differ from copyrights and patents in that they present a use-it-or-lose-it proposition. A trademark is designed to identify the source of goods or (if a service mark) services. But it is only good so long as it does that.
Example: You open a pizza place (Pizza is wonderful food!) called, “Cougar Pizza.” There are no other such places anywhere with that name. Then, some shmuck, incapable of doing anything original (many such people exist), opens his own Cougar Pizza restaurant in the same part of town. If you just sit back and allow that to occur, you could lose your trademark because the name no longer identifies one particular source of pizza. Someone could see a delivery car with “Cougar Pizza” written on the side and not know whose pizza is inside.
You can sell and assign a copyright or a patent, but not a trademark – at least not by itself. If you own the stock in Cougar Pizza Inc., a chain of pizza restaurants with many employees and an established pizza recipe, you can sell the stock in the company, and the trademark goes along with the corporation that owns it. But if someone opens a pizza place and wants to call it Cougar Pizza, you cannot give him permission to do that in return for a fee – called a “license.” The reason goes back to the fundamental concept that a trademark is designed to distinguish the source and origin of goods. It is the same reason why you cannot just stand there idly while a competitor opens up with the same name.
Now, assume that Cougar Pizza catches on like hula hoops, running with Shakey’s, Pizza Hut, Domino’s, and California Pizza Kitchen. Cougar Pizza now has become so popular that frozen Cougar Pizza would sell a ton. So, some guy with a factory approaches you, requesting permission – for a fee – to sell frozen Cougar Pizzas to grocery stores. “Fine,” you say, “give me 3 percent of gross, wholesale revenue.” However, you do not get involved with anything about the grocery-store pizzas, except your name. That is called a “naked license,” which not only is invalid, but it risks your claim to the Cougar Pizza mark.
So, what can you do? A valid trademark license can be granted. However, there must be control on the part of the licensor – Cougar Pizza Inc. For example, a good license in this context might require that the licensee – the grocery-store pizza guy – use Cougar Pizza’s recipes, perhaps slightly modified to facilitate freezing; it would give the licensor a right to supervise quality control, as well. This protects the mark because, with those constraints in place, the mark still identifies the ultimate source of the product, Cougar Pizza. When cooked (according to the directions, that is), the frozen version will taste about the same as the one you get at the Cougar Pizza restaurant.
Franchises do that. If you go to a “Golden Arches” for a cheeseburger, you are certain to get the same dried out, overcooked beef patty with a slice of something resembling cheese but tasting like chemicals on a dried out bun – or maybe, in your eyes, a delicious and generous slice of gourmet prime beef covered with just the right amount of delicious cheese in a premium bun. Whatever, they all taste the same in McDonald’s franchises everywhere, whether in Chicago or Moscow. All will have a franchise agreement that includes a trademark license and all kinds of controls to make sure that McDonald’s restaurants are congruent and run identically.
In short, trademark license agreements should be carefully scrutinized by the trademark owner’s attorney. The licensee, on the other hand, does not much care – it is not his trademark.
Clyde DeWitt is a Los Angeles and Las Vegas attorney, whose practice has been focused on adult entertainment since 1980. He can be reached through AVN’s offices, or at [email protected].
