For established brands, trademark licensing can be a very lucrative enterprise. It allows the brand to expand its existing markets or venture into new ones with little additional risk or investment. This was not always the case. Under common law, licensing was tantamount to abandonment, the rational being third party use of the trademark meant the mark could no longer be associated with a single source. See Macmahan Pharmacal Co. v. Denver Chem. Mfg. Co., 113 F. 468 (8th Cir. 1901). The law has evolved to embrace the reality of most intellectual property, that a trademark itself is a revenue generating property, not merely a means to protect goodwill.
Today, a trademark is licensable so long as the licensor maintains control over the quality of the product marketed under the mark. This standard is not clearly defined in a statute, but the authority to do so is: 15 U.S.C. §1055 provides that use of a trademark by a “related company . . . shall not affect the validity of such mark or registration, provided such mark is not used in such a manner as to deceive the public.”
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