By Government Contracts Editorial Staff
The Court of Appeals for the Federal Circuit affirmed the summary denial of breach claims because the government’s exercise of its broad approval discretion under the trademark license agreement was consistent with principles of trademark law, and there was no justification to disregard the agreement’s exculpatory clauses. The contractor claimed the government breached an agreement to use specified Army trademarks by denying it the right to exploit the goodwill associated with the trademarks and denying approval for advertising, including advertising featuring Dwayne “The Rock” Johnson. The Court of Federal Claims determined that the agreement’s express exculpatory clauses precluded recovery of damages based on the government’s exercise of its discretion to approve or disapprove products and marketing materials, and the government’s conduct was reasonable and consistent with its obligations under the agreement (64 CCF ¶81,818). On appeal, the contractor argued the government’s breadth of discretion, as adopted by the CFC, allowed the government to restrict the use of the trademarks to solely “decorative” purposes, which invalidated the trademarks by separating them from their associated goodwill.
Spirit of Trademark Law. However, the government’s licensing practices did not nullify the agreement’s express clauses, and the contractor was held to the terms for which it bargained. Further, the government’s exercise of its broad approval discretion was consistent with principles of trademark law. The contractor alleged a “right to identify [the Army] as the source/sponsor of the licensed goods,” but the contractor was the source of the goods and expressly agreed it could not represent that its products were made, “supported, endorsed or sponsored,” by the Army. Also, a “decorative” use of a trademark was not necessarily divorced from the goodwill associated with the trademark and could be considered a licensed use for trademark purposes. The government’s approvals were within the spirit of trademark law and the license agreement because they allowed the contractor to benefit from the goodwill associated with the Army’s marks while requiring that the contractor sell its products under its own name. (Authentic Apparel Group, LLC, et al. v. U.S., CA-FC, 65 CCF ¶82,088)
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