Trademark Licensing Agreement

Trademarks are intellectual properties that can be owned and licensed just like any other property. The goodwill and reputation gained by a particular trademark make it nothing short of a fortune. Sometimes proprietors find it lucrative to license the usage rights to other traders for fees, provided that they are able to exercise control over the goods and services that use the trademark. Control by a registered proprietor is also a legal requirement, the absence of which may lead to dilution in the distinct nature of the trademark and also customers getting deceived by low quality goods. Licensing of a trademark is described in The Trade Marks Act as Registration of a registered user. It is done filing form T.M- 28 under the Trademark Rules 2002, and further, creating a detailed agreement to set forth the terms and conditions.

What Is A Trademark Licensing Agreement?

A Trademark Licensing Agreement is a document entered into between the registered owner of a trademark and a proposed licensee. The agreement mentions the terms and conditions based on which the licensing takes place, the rights and control to be exerted by the parties; the permitted uses/limitations and other factors like fees and legal requirements.  

A trademark license agreement should include the following points:

Description

There should be a description of the parties, the nature of their businesses and the ownership of the trademark proposed to be licensed. The class of the goods/services is to be mentioned as well.

Permission

Details about the permission to be granted should be enumerated. The limits of the proposed usage should be specified exhaustively. The user shall not be allowed to exceed the usage mentioned here.

Trademark

The total description of the trademark shall be made here. Every bit of detail in the combination of colours, words, shape, symbols, labels, packaging or any other representation shall be documented. It is important in order to receive protection.

License

The grant of license shall be described in detail. It shall include the nature of the license to use the trademark: which has to be non transferable. All points incidental to the grant of license shall be made note of here.

Exclusive/Non Exclusive

The details whether the license shall be exclusive should be made clear. An Exclusive license creates monopolistic rights over use of the trademark. A non exclusive license has chances of being granted to others as well.

Ownership

The ownership of the trademark shall lie exclusively with the registered proprietor. It should be made clear that the licensee shall claim no ownership regarding the trademark at any point of time when the agreement is in force or otherwise.

Term of the License

It is important to mention the exact duration of the license. After the term, it may be renewed at the discretion of the parties.

Grounds for Termination

The ways in which a trademark licensing agreement may be terminated by licensor is important. It may include reasons of the following nature.

1. Licensee failing to make commercial use of the trademark within a specified period from the date of agreement.
2. Licensee ceasing to make commercial use for a specified period: for instance, 12 months.
3. Failure to meet the quality standards for the products as specified in the license.
4. Change in control over licensee’s business. In such a case, the new owners may not be obligated to follow the rules and regulations of usage set by the license.
5. Breach of any other provision, term or condition of the agreement by the licensee

Procedure for Termination

The ways in which the agreement shall be terminated by the licensor should be described in detail. This shall include the way to provide notice and the number of days that should lapse between notice and termination. Once the termination happens, the licensee should be made to stop the usage of the trademark in all forms.

Payment Details

There can be a number of ways in which payment can be done for licensing of a trademark. They include:

1. Fixed fees for the duration of the agreement.
   This is the most common way of paying for a trademark license.
2. Royalty fixed per unit of goods sold under the trademark.
3. Royalty fixed as a certain percentage of sales proceedings received for trademarked goods.

Control by Proprietor

Details pertaining to periodic inspection of goods and processes, and submission of reports if required by the licensee, to the proprietor should be recorded.

Quality Control

Facts about exact quality of the goods which are to be maintained by the licensee should be made explicit. Such details shall be fixed by the proprietor. The licensee may also be made to provide samples of goods, packaging etc when demanded by the proprietor.

Warranties by proprietor

The registered owner of the trademark should make warranties regarding the exclusive rights he/she enjoys over the trademark and his/her rights to licence the mark. If applicable, the proprietor should warrant that such license has not been granted to any other trader or licensee.

Other Details

Details such as governing law, dispute jurisdiction, severability and other legal requirements of an agreement may be added to the agreement.