Did Hershey's Just Abandon its Trademark?

Here is something I picked up at the local Target store. It's a Hershey's-brand three-compartment silicone muffin pan. When you bake muffins in this pan, they come out - adorably, of course - in the shape of oversized Hershey's chocolate bars - complete with the Hershey's name and logo intaglioed in the shape of the finished muffin. The imprint of the Hershey's name and logo is substantially the same as what one finds on a Hershey's milk chocolate bar, after the foil is unwrapped.

Clearly, if you buy this muffin pan, there is an implied license to use it to make muffins with the Hershey's logo. That is, there is an implied trademark license. But, as you might expect, Hershey's exercises no control over the muffins you make with their logo in the pan you purchased.

Thus, this looks like a case of "naked licensing" - a fast way for a trademark owner to be involuntarily stripped of trademark rights.

Whoops.

"Naked licensing," according to the courts, "is an uncontrolled licensing of a mark whereby the licensee can place the mark on any quality or type of goods or services."*

That's clearly what is happening with the muffin pan.

So what's wrong with naked licensing? It goes to the very essence of trademark. The reason for protecting trademarks is that they give consumers information. Specifically, they give potential buyers of goods a reliable indication of the source of those goods. If a trademark owner licenses a trademark nakedly, that is, without retaining control over the quality of the goods made under that mark, then the trademark has completely lost its source-identifying function.

A trademark owner engaged in naked licensing is "raising a grave danger that the public will be deceived."* For instance, someone buying a Hershey's muffin at a bake sale may be - likely is - getting a product which the Hershey's company had absolutely no hand in making, other than providing the mold. In fact, the "Hershey's" muffin could be made with entirely with Nestle's chocolate. Yikes!

The penalty for naked licensing is apocalyptic for the trademark owner. Trademark rights are lost completely. A 2006 case says:

“When the trademark owner fails to exercise reasonable control over the use of the mark by a licensee, the presence of the mark on the licensee's goods or services misrepresents their connection with the trademark owner since the mark no longer identifies goods and services that are under the control of the owner of the mark. This may result in the trademark ceasing to function as a symbol of quality and controlled source, leading to an involuntary loss of trademark rights."*

The packaging for the muffin pan - identified as a "Hershey's Licensed Product" - contains this legend: "THE HERSHEY'S TRADEMARKS AND TRADE DRESS ARE USED UNDER LICENSE." This prophylactic spray of legalese is steeped in irony. How could Hershey's put such care into making sure the muffin pan manufacturer had a license and would declare the same, yet witlessly end up issuing a license to all muffin-pan buyers to start churning out food items under the Hershey's brand?

The NFL has struggled with this sort of problem in its sales of embroidered team-logo patches. The patches come with an admonition saying the patches are not intended to be affixed to clothing.

So what are you supposed to do with an officially licensed NFL patch then? The web-based NFL Shop suggests that you "add football flair to any scrapbook, framed autograph or even to your room decor[.]"

So, has Hershey's lost its trademark?

Well, I doubt it will be litigated. And the legal realist in me doubts a federal judge would exact such a dear price from an iconic American company. And, of course, we'd have to see what arguments would turn up when the issue was briefed by resourceful and creative litigators. Regardless, it's an interesting situation to ponder.

I think I'll cook up some Hershey's muffins for my Intellectual Property class this fall - using Nestle's chocolate, of course.

[Cross-posted on Pixelization.]
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* All case quotes from Doeblers' Pennsylvania Hybrids, Inc. v. Doebler, 442 F.3d 812, 823-834 (3d Cir. 2006) (brackets, internal quotes, and citations, including to 2 McCarthy on Trademarks § 18:48, removed, punctuation changed).