At Jafari Law Group, we often hear from business owners who want to grow by letting another company use their brand name, logo, or slogan. Trademark licensing can be a smart business move, but it comes with a legal risk many owners do not see coming: if you license a mark without enough quality control, you can weaken your rights and, in the wrong case, face an abandonment argument. Under the Lanham Act, abandonment can occur when a mark no longer functions as a source identifier, and courts have long treated “naked licensing” as a serious problem for trademark owners.
What a trademark license actually does
A trademark license lets someone else use your mark under defined terms while you keep ownership of the mark. That is different from an assignment, where ownership is transferred. The starting point under federal law is that the owner of a trademark used in commerce is the party entitled to seek registration, which is why the agreement needs to make clear that the licensee is using the mark with your permission and that ownership stays with you.
The biggest risk: naked licensing
The core issue is control. In FreecycleSunnyvale v. The Freecycle Network, the Ninth Circuit explained that naked licensing happens when a licensor does not exercise adequate quality control over the licensee’s use of the mark, so the mark may stop representing the level of quality consumers expect. The court also explained the three questions courts often look at: did the owner keep contractual rights to control quality, did the owner actually control quality, or did the owner reasonably rely on the licensee’s own quality controls in a close working relationship.
That matters because a trademark is not just a piece of paper from the USPTO. It is a symbol that tells consumers what they are getting. If different licensees use the same mark on inconsistent goods or services and the owner is not watching, the mark can lose its value as a source identifier. That is the policy reason behind the naked licensing doctrine.
How to license a trademark without giving up control
The first step is to use a written agreement. A handshake deal or a vague email thread leaves too much room for dispute. The license should say exactly which mark is being licensed, who can use it, where it can be used, on which goods or services, for how long, and whether the license is exclusive or non-exclusive. It should also state clearly that the trademark owner keeps ownership of the mark and all goodwill tied to it. Those points help draw the line between licensing and transferring ownership.
The second step is to include real quality-control terms. This is where many businesses get into trouble. The contract should give the trademark owner the right to review and approve how the mark appears on packaging, websites, ads, labels, social media, and other customer-facing materials. It should also set standards for the goods or services sold under the mark. In FreecycleSunnyvale, the Ninth Circuit made clear that retaining contractual control is one of the main ways a licensor can defend against a naked licensing claim.
The third step is to exercise those rights in practice. A strong contract alone is not always enough if the owner never checks compliance. Courts look at real-world oversight, not just boilerplate language. That can include reviewing samples, keeping brand guidelines, conducting periodic audits, requiring approval before launch, and documenting corrections when the licensee drifts from the agreed standards. In FreecycleSunnyvale, the court found the owner lacked adequate control because the supposed standards were not enforced and were not effective in maintaining consistency.
The fourth step is to control sublicensing. If your licensee can freely let others use your mark, your brand can move further away from your supervision. Any sublicensing should require your written consent and should bind the sublicensee to the same quality and brand-use rules. That helps avoid a chain of uncontrolled uses that can damage the mark. This point follows directly from the same quality-control principles courts use in naked licensing cases.
The fifth step is to make termination rights meaningful. If the licensee fails quality checks, misuses the mark, misses reporting obligations, or uses the mark outside the agreed territory or product line, the agreement should let the owner suspend or terminate the license. A trademark owner that cannot stop improper use may have trouble showing it maintained control.
Brand guidelines are helpful, but they are not enough by themselves
Many companies have a logo sheet or short style guide and assume that is all they need. Brand guidelines are useful, but they work best as part of a larger licensing program. They should address visual use of the mark, approved colors, spacing, placement, prohibited modifications, required notices, and rules for online use. Even so, guidelines should be paired with approval rights, monitoring, and documented enforcement. The case law focuses on actual quality control, not just whether a file existed in a shared folder.
Registration helps, but it does not fix a bad license
Federal registration remains important because it strengthens enforcement and public notice, but registration alone does not protect a mark from problems caused by poor licensing practices. The Lanham Act’s abandonment provisions still apply, and cancellation can become part of the fight if an opponent argues the mark no longer signifies a controlled source. In other words, registration is part of the strategy, not a substitute for oversight.
A common mistake: confusing a trademark license with a business deal
Business owners often focus on revenue share, royalties, minimum sales, and marketing promises. Those issues matter, but trademark law adds a separate layer. You are not just granting commercial rights. You are allowing another party to stand in front of customers using your brand. That means the agreement should be built not only for payment, but also for control, consistency, and enforcement. The legal test the courts apply is tied to whether the mark still tells consumers they are getting a consistent source and level of quality.
When to get legal help
Trademark licensing deserves more attention than many companies give it. A simple one-page agreement may look efficient, but it can create larger problems later if it leaves out quality standards, territory, approval rights, ownership language, or remedies for misuse. This is especially true when the license crosses state lines, involves e-commerce, or allows another company to put your mark on physical products, software, or service offerings that customers will closely tie to your reputation. The legal rules around naked licensing and abandonment are settled enough that waiting until there is a dispute is often the expensive way to learn them.
At Jafari Law Group, we help businesses structure trademark licenses agreements that support growth without giving away control of the brand they worked hard to build. If you are considering a trademark license, or if you already have one in place and want to review the risks, we offer free case evaluations.