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  • Writer's pictureMichael W. Schroeder

All You Need To Know About Trademark Licensing

Trademark licensing is an agreement between a licensor (trademark owner) and a licensee (another party) wherein the trademark owner consents to the other party using its trademark for their commercial activities based on mutually agreed-upon terms. The basic terms of this agreement include the licensing of the trademark(s), an identification of the parties, the quality and nature of the goods or services offered under the trademark, and the geographic territory in which the licensee will be able to use the trademark commercially. The agreement also includes other terms such as royalty terms, quality control provisions, whether or not the license is exclusive, and the license term.

The very basis of a trademark license is quality control. The licensor must be able to control and monitor the use of its trademark by the licensee, ensuring that it is consistent with the interest of the licensee. The consumer should get the same quality of services or goods irrespective of whether the licensor or licensee is rendering the services or distributing the goods.

Trademark licensing comes with a number of benefits. To begin with, it generates revenue, and with trademark licensing, the licensor trademark owner can also achieve territorial expansion. Trademark owners can also benefit from co-branding that comes with trademark licensing and entering into an agreement with a licensee. Simply put, a trademark owner can collaborate with a strategic partner so that it can benefit from the latter’s marketing, distributing, or manufacturing and sales abilities. Moreover, a trademark owner can also enhance the brand’s consumer recognition with trademark licensing. More use of a mark will naturally result in greater brand recognition. Another advantage is that trademark owners can share promotion and advertising costs with a licensee. Furthermore, trademark licensing can also be used to resolve infringement. Instead of incurring litigation costs, trademark owners can persuade infringers to use the trademark by paying for a license.

Effect Of Licensing On Trademark Registration

Trademark use is beneficial to the licensor, i.e., the party that controls the quality and nature of its goods and services. This party owns the trademark in question. Trademark Act’s Section 15 states that where a mark that is sought to be registered or where a registered trademark is used by any related companies, its use will benefit the trademark applicant or the registrant, and this use will not affect the mark’s validity or registration. The only thing is that it should not be used for, is to deceive the consumer in any manner whatsoever. There is no requirement in the United States to record a license agreement with the USPTO. That said, other countries may need licensors to record a license to ensure that it is effective against a third party.

In all franchisee and licensee agreements, the vital part in determining ownership is the extent and nature of the applicant’s control with respect to the applied trademark’s services and goods.

Some examples of the ways in which a trademark applicant may control and monitor the quality of the services and goods are:

  • Inspect the facilities of the licensee to make sure they comply with the terms and laws of the license

  • Review production samples that are a part of the agreement to make sure that the product standards of the licensor are being followed

  • Review general feedback or comments or service complaints

Failure to exercise sufficient control over or monitor the services of the franchisee or licensee may cause the licensor or trademark owners to abandon its trademark rights altogether.

Importance Of Trademark Licensing

You must protect your trademark. If a licensor fails to maintain quality control over the services and products associated with its trademark, they might have to abandon their rights altogether in the future. Therefore, it is important to be proactive when it comes to protecting your trademark. That said, enforcing trademarks can be a bit of a challenge.

Huge brands can afford to hire lawyers to check offline and online for people using their trademarks illegally. On the flip side, small companies or startups that do not necessarily have these resources might find it more difficult to enforce their trademark. While trademark enforcement is crucial for the maintenance of a trademark, startups or small businesses might damage consumer goodwill if they do not handle this issue carefully. This is where a highly experienced firm that specializes in trademark enforcement, licensing and registration, with prices that won’t break the bank, like Trademark.Legal, can become an invaluable and powerful tool.

Get In Touch With A Trademark Attorney

Trademark licensing agreements are a great way to boost your business. That said, you should not enter into one lightly, as many hidden, potential pitfalls could exist, and you should have competent, legal representation when you do decide to enter into an agreement. Contact Trademark.Legal to hire an highly-experienced trademark attorney for help with trademark licensing! We are dedicated to protecting your trademark rights every step of the way.

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