Mid-Atlantic Health Law TOPICS

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Those Trademark Licensing Blues

You would be singing a sad song, indeed, if your right to use a prominent name in the health care industry was taken away from you. The song would be more mournful if you were no longer allowed to use the Blue Cross name and insignias. This was the case for Blue Cross and Blue Shield of Ohio (Ohio BCBS) when the National Blue Cross and Blue Shield Association (National BCBS) determined that Ohio BCBS had breached its trademark licensing agreement with National BCBS.

The case is a lesson to all entities that seek to gain market share, resources, recognition or patients by becoming the franchisee or licensee of the owner of a well-known mark. Generally, the right to use a name and logo is granted by way of a franchise agreement or a trademark or service mark license agreement. In such agreements, the owner of the mark invariably includes a variety of triggers by which the agreement, and thereby the right to use the mark, terminates.

In regard to Ohio BCBS, the Ohio Attorney General began an investigation into the charitable activities of Ohio BCBS, including an attempt to force Ohio BCBS to liquidate and re-emerge as a for-profit entity. However, the liquidation or threat of liquidation was a trigger under which National BCBS could terminate the Ohio BCBS' trademark license.

While the Ohio Attorney General's investigation was proceeding, Ohio BCBS also entered into an agreement to sell its business to Columbia/HCA. That sale was not authorized by National BCBS, and was claimed by National BCBS to be another event by which National BCBS could trigger termination of the trademark license agreement.

Ultimately, in Blue Cross and Blue Shield of Ohio v. Blue Cross and Blue Shield Association, it was determined that National BCBS was entitled to terminate the license agreement.

The moral of this sad song is obvious. Trading on the goodwill associated with a well-known mark comes with a significant risk. The licensee or franchisee must abide by the terms of the franchise or license agreement, or face the reality that the license agreement can be terminated, and the right to use the well-known name will thereby end.