Many companies that market their products or services through distribution channels give their distributors licenses to use company trademarks and logos in order to facilitate marketing efforts. However, it is important for those companies to remain vigilant against overbroad license terms that may give the distributors rights in excess of what those companies may believe is reasonable or necessary to accomplish those ends. This consideration is doubly important when the distributor has substantially greater bargaining power than the manufacturer.
Video Professor, Inc., the manufacturer of a collection of heavily advertised, self-paced, computer education videos, may have learned this lesson the hard way in forming a relationship with Amazon.com to market its videos online. At the outset of the relationship, Video Professor agreed to the terms of Amazon’s Vendor Manual. The Vendor Manual Video Professor signed included a license giving Amazon the right to use Video Professor’s trademarks, including its core, registered VIDEO PROFESSOR® mark. However, the terms of that license were surprisingly broad:
Vendor [VPI] hereby grants to Amazon.com a non-exclusive, worldwide, perpetual, and royalty-free license to ... (c) use all trademarks and trade names included in the Product Information.
Almost shockingly, the Vendor Manual also included language specifying that the license grant “will survive the termination of any or all of this Vendor Manual.” Video Professor terminated its agreement with Amazon in September 2008. However, from December 2003 through April 2009, Amazon placed bids with Google for paid advertisements linked to the “video professor” keyword, and Video Professor subsequently determined that links from some of those ads went not to Video Professor’s products, but rather to those of its competitors.
Video Professor filed suit against Amazon in the Colorado U.S. District Court for damages related to infringement of its trademark. However, without reaching the substance of Video Professor’s trademark claims, the court granted Amazon’s motion for summary based on the license terms, holding that the “scope of the license in the Vendor Manual is plain and unambiguous, and Amazon's use of the mark “video professor” was within the scope of the license.”
When a company gives any other party a license to use its trademarks or any other intellectual property, it is vital that the parties’ agreement specify that the license is revocable by the IP owner or that the license terminates upon termination of the agreement, if not sooner. It is equally vital that the scope of permissible uses of the subject IP be limited to the furtherance of the relationship contemplated by the agreement. Ideally, the agreement also will give the IP owner the right to injunctive relief to stop any misuse of the subject IP notwithstanding any other dispute resolution provisions in the agreement.
A company’s intellectual property often is among its most valuable and important assets. Overbroad license terms can seriously diminish that value and may make it difficult to enforce the company’s IP rights in the event of misappropriation. When considering an IP license grant in favor of any party, a company should consult with counsel to ensure that the terms of that license do not run counter to the company’s plans and expectations.