In a recent state court trademark decision, Movie Mania Metro, Inc. v. GZ DVD’s Inc., No. 311723 (Sept. 9, 2014), the Michigan Court of Appeals held that Plaintiff’s MOVIE MANIA trademark had become invalid as a result of naked licensing.

Plaintiff commenced use of the name “Movie Mania” in 1989 in connection with a video-rental operation, and subsequently registered the trademark with the Michigan Department of Regulatory Affairs. In 1999, Plaintiff began licensing use of the mark to various third-party video-rental businesses. The licensing agreement, however, contained virtually no quality control standards such as standards on advertising, store operations, or the rental or sale of merchandise. In 2010, Defendant purchased a “Movie Mania” store from a current licensee and, over Plaintiff’s objections, proceeded to open another video-rental store bearing the “Movie Mania” mark. Plaintiff sued, alleging trademark infringement under the Lanham Act, Michigan Trademark Act, and common law.

The trial court granted Defendant’s motion for summary judgment, finding that Plaintiff’s claims were precluded as a matter of law because its naked license had led to an “abandonment” of its trademark. The Michigan Court of Appeals affirmed, holding that Plaintiff’s uncontrolled licensing of the “Movie Mania” mark without standards or restrictions over five-plus years was a textbook example of naked licensing. It noted, however, that the proper framework for assessing naked licensing under Michigan state law was not abandonment but invalidity, as naked licensing causes a trademark to lose its ability to serve as a valid source identifier.